Indonesia: SOEs Minister calls for avtur VAT exemption

• Feb 14, 2019

State-Owned Enterprises Minister Rini Soemarno has expressed hope that aviation turbine (avtur) fuel will be exempted from value-added tax (VAT).

The price of avtur has been blamed for high airline ticket prices. “Hopefully the VAT for avtur will be abolished,” said Rini in Jakarta on Wednesday.

The government slapped a 10 percent VAT on avtur for domestic flights while international flights are exempt from such taxes, as stated in Government Regulation No. 26/2005.

Rini added that the government was looking for ways to reduce the cost of avturafter Energy and Mineral Resources Minister Ignasius Jonan issued a decree on Feb. 1 that outlined the base price formula for avtur.

“We are looking into our cost structure to find out if it follows the Energy and Mineral Resources Ministry’s formula and whether we can reduce [the price of avtur],” said Rini.

President Joko “Jokowi” Widodo had promised to discuss the increase of avturprices with state-owned energy firm Pertamina after receiving complaints from tourism and hospitality players, who said the increasing prices of airline tickets was responsible for lower hotel occupancy rates.

Jokowi added that he would give Pertamina two options: either to lower the price of avtur, or the government would allow other firms to sell it, meaning Pertamina would have to relinquish its monopoly over avtur sales.

Finance Minister Sri Mulyani Indrawati said she was open to revising the VAT to ensure the competitiveness of fuel prices compared to neighboring countries.

“In terms of a level of playing field, we are open to matching [the VAT for avtur] with other countries such as Singapore and Malaysia,” Sri Mulyani said as quoted by Antara.

Tourism Minister Arief Yahya said the increase in airline ticket prices had greatly affected tourism, particularly for those who relied on domestic tourists. 

He suggested that should airlines want to increase their ticket prices, they should do so in a gradual manner. (bbn)

Source: https://www.thejakartapost.com/news/2019/02/14/soes-minister-calls-for-avtur-vat-exemption.html