Proposed Removal of VAT Exemptions Sparks Concern in Kenya's Aviation Sector

The Kenya Association of Air Operators (KAAO) has raised alarm over the proposed removal of VAT exemptions targeting the aviation sector in the Finance Bill 2024.

These exemptions, crucial for fostering growth and investment in the industry, are under threat, prompting fears of adverse consequences for Kenya’s economy.

The targeted exemptions cover various aspects of aviation, including aeroplanes, spacecraft, hiring, leasing, and chartering aircraft, as well as aviation instruments and appliances. According to the KAAO, the elimination of these exemptions could lead to a surge in acquisition costs for airlines and operators, ultimately driving up prices for air travel, cargo services, and other aviation-related activities.

Moreover, the potential abolition of VAT exemptions on hiring, leasing, and chartering aircraft poses a significant risk of escalating operational costs. This could result in reduced accessibility and affordability of crucial aviation services, affecting sectors such as tourism, trade, and emergency response, which rely heavily on air transport.

The removal of exemptions for spacecraft and launch vehicles also raises concerns about stifling investment in space-related endeavors, hindering innovation and collaboration in this emerging field.

In response to these concerns, the KAAO is urgently appealing to the Government and policymakers to reconsider the proposed removal of VAT exemptions. They emphasize the importance of preserving these measures to sustain industry growth, ensure sector competitiveness, and uphold Kenya’s position as a regional aviation hub.

The KAAO’s stance underscores the significance of maintaining VAT exemptions in line with international recommendations and regional tariff agreements. They argue that preserving these measures is essential not only for encouraging investment and industry growth but also for safeguarding Kenya’s economic prosperity and regional competitiveness.

As discussions around the Finance Bill 2024 continue, stakeholders in the aviation sector are closely monitoring developments, hoping for a favorable outcome that will support the industry’s continued growth and contribution to Kenya’s economy.