Tax exemption on instrastate flights welcomed — Matta

KOTA KINABALU: The Malaysian Association of Tour and Travel Agents (Matta) welcomes the federal government’s announcement on exemption of Sales and Services Tax (SST) next month for all intrastate flights in Sabah and Sarawak.

Matta President Datuk Tan Kok Liang said that while it did not fulfill their request for a full exemption on domestic flights, it was good news for the Borneon states.

Tan when contacted yesterday pointed out that Matta initially requested for full exemption on domestic flights when the SST is implemented.

“Under the GST regime, service tax was imposed on intrastate flights … with this announcement at least there is some improvement as domestic flights are essential mode of transport in Sabah and Sarawak,” he stressed.

Tan last week said that “the Frequently Asked Questions (FAQ) in the Royal Malaysian Customs Department’s website state that domestic flights on or after 1st September 2018 are subjected to a 6 per cent service tax. Under the previous Tax Model, domestic flights were outscoped to service tax.”

Matta, he said appealed to the Ministry of Finance for all domestic air tickets be exempted from service tax and the government could collect much more SST from higher spending on other goods and services.”

Exempting service tax on all domestic air tickets is to ensure other states in Malaysia will also appeal to tourists as holiday destinations, he was quoted as saying.

“As of now, tourists especially bound for East Malaysia are complaining of high air fares from Kuala Lumpur. How are we to develop smaller towns and states apart from Kuala Lumpur as tourism hubs?

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“Unfortunately, the high costs of air travel especially between the Peninsular and East Malaysia have driven Malaysians to opt for regional travel instead of local holidays. Adding six per cent service tax on domestic flights would be a disincentive for ‘flying local’,” he said.

Tan added, “Service tax exemption on all domestic air tickets would benefit the state’s and the country’s economy. Domestic tourism is one of the key anchors in the tourism industry and expected to continue its growth trajectory with inbound tourism receipts amounted to RM82.1 billion last year, and domestic tourism RM83.1 billion.”

“The resulting multiplier effects of the service tax exemption would inevitably add to government revenues through enlarged economic activities especially from visits between the Peninsular and Sabah and Sarawak seeking employment, education, medical needs and family commitments. Furthermore, air transportation for many East Malaysians is considered a necessity in view of its geographical landscape and the lack of adequate land transportation.”

On Saturday, Finance Minister Lim Guan Eng in announcing the exemption said it was given as most of the time air travel was the only practical option for travelling between cities in the two states.

“This will only work if you are flying from, say, Kuching to Bintulu or Miri, or from Kota Kinabalu to Tawau. But not from Kota Kinabalu to Kuching. Then you will still be taxed under SST,” he said.

He said no such exemption would be given for flights in Peninsular Malaysia, due to the relatively short travel distance between cities in a state.

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“How many domestic airports do we have in one state? If you’re in Senai, Johor, where do you want to fly to in the state?” he said during a briefing with Customs director-general T Subromaniam.

Later, Subromaniam told reporters that the tax exemption was given because Sabah and Sarawak have many domestic airports.