Indonesian ticket prices have turned out to be among the highest in the world. In terms of domestic air travel costs, Indonesia ranks second only to Brazil. This was highlighted by Coordinating Minister for Maritime Affairs and Investment, Luhut Binsar Pandjaitan.
"Compared to ASEAN countries and other densely populated nations, airfares in Indonesia are the second most expensive after Brazil," Luhut wrote on social media.
One contributing factor is that these tickets are subject to Value Added Tax (VAT). Since April 1, 2022, the price has increased by 11% due to this tax, and by January 1, 2025, the tax rate is expected to rise to 12%, as stipulated in the law on the harmonization of tax regulations. As a result, ticket prices could become even more expensive in just six months.
To prevent this, Robby Kurniawan, head of the transportation policy agency (BKT) of the Ministry of Transportation, proposed eliminating the tax on air tickets.
"I propose eliminating taxes on airplane tickets to create an equal playing field with other modes of transportation that are not subject to such taxes," he said.
This proposal was supported by Indonesia's Minister of Tourism and Creative Economy, Sandiaga Uno. He believes that such a tax relief could significantly reduce the cost of domestic flights.
"I fully agree [with providing tax relief] because, as we see, one of the factors contributing to the high ticket prices is the tax," he said.
At the same time, the minister noted that such a tax break could lead to potential loss of state revenue. However, if more affordable tickets motivate people to travel more frequently, the national economy could regain balance. In his opinion, spending by local tourists could surpass that of foreign tourists.
"So, we need to find a combination of policy measures that could offset the loss of tax revenue from ticket sales. In fact, state revenue could increase from the movement of Indonesian tourists," he said.
The proposal to abolish taxes on domestic flights will indeed help level air transport with other modes of transportation. Ground and water VAT have not been taxed according to a government decree from 2000. This specifically concerns domestic flights, as international flights take place outside Indonesia's customs zone.
Still, Indonesian officials are interested not only in more frequent movements of domestic tourists. Despite Bali breaking attendance records, the question of how to attract even more foreigners to Indonesia remains relevant for local authorities.
In developing an action plan to enhance Indonesia's appeal to foreigners, Minister of Tourism and Creative Economy Sandiaga Uno also pointed out that one of the most effective possible measures is to reduce flight costs.
Later, the deputy chairman of the Bali Tourism Industry Association (GIPI), I Nyoman Astama, spoke about a significant increase in ticket prices for travelers flying to the island from Europe—almost doubling. Therefore, the Indonesian government has also begun considering the option of subsidizing airline tickets from the state budget.
For now, all the mentioned benefits exist only at the stage of ideas and discussions. It is not reported when any of this will be implemented.
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