Kenya’s Economy Would Be Crippled By Air Tax

March 27, 2011 Taxation in Kenya

Kenya Airways - Pride of AfricaKenya’s newly proposed air fare tax has been blasted by the airline and tourism industries, with the charge being described as “haphazard” and a means of covering for ministry failures.

Over the weekend Kenya’s tourism sector voiced its disapproval for the government’s plan to introduce a new air fare levy to the national tax system, with commenters saying that it would lower visitor numbers and ultimately lead to seriously negative impacts to the economy.

The proposed levy was revealed last week by the Public Health and Sanitation minister Beth Mugo, who said that the raised revenues would be used for treatment and care of HIV sufferers. According to the released plan the tax would be instated on all outbound tickets at a rate of no more than KES 180 (approx. USD 1.90). It was claimed by the minister that the charge would be easily accepted by tourists, and will prove to be an effective revenue raising program. To be instated the new tax will need to be approved by the Cabinet in approximately two months.

At a press conference held on March 26th in Mombasa, the Vice-chairman of the Mombasa and Coast Tourism Association Mohamed Hersi spoke out against the levy, saying that it was “…created overnight to cover for failures in some ministries”. He went on to say that the proposal was “haphazard” and suggested that the government should seek to fight corruption and tax evasion in order to see the revenues necessary to fund healthcare programs.

The tax has also been met with opposition from the airline industry, with the chief executive of Kenya Airways Titus Naikuni coming forward to say that the new tax will be disastrous for the sector and for the national economy as a whole. He suggested that taxes would have detrimental effects on tourism, and increase the costs associated with transportation and logistics in the country’s vital horticulture sector.

Photo by Wayan Vota