Malaysia is set to implement a series of tax increases for both domestic and international bound flights starting in 2017. Although undergoing finalization, it has been confirmed that all tax increases have been approved by Malaysia’s legislature. With rates confirmed, criticism and outcry from the nation’s aviation industry has been growing as many worry about the ramifications for domestic carriers as well as Malaysia’s position as a regional aviation hub.
New Aviation Rates
Set to be implemented from January 1st, 2017, the following flat rates will be applied to individual tickets dependent upon their destination.
- RM11 (US$2.66) for domestic flights
- RM35 (US$8.47) for flights to ASEAN countries
- RM73 (US$17.66) for international flights
The destination dependent fee structure set to be adopted differs from the previous system that levied taxes by taking into account both the destination as well as the point of departure. For Malaysia’s budget airport (KLIA2) the imposition of a RM73 (US$17.66) fee for international travelers is a substantial increase over the current fee of RM32 (US$7.74) that is applied.
Implications for ASEAN Aviation
The impact of tax changes is hotly debated. For companies, the move is likely to reduce margins and force a rethink over current levels of pricing. The real question, and something that remains to be seen, is the impact that increased taxes will have on the viability of Kuala Lumpur as a hub for aviation within the region. Although airlines within the country actively depict the tax as a surefire way to decrease competitiveness, others have been quick to point out the strong degree of control that KL continues to exert on aviation within the region.
In the coming weeks, details on the specifics of the taxes, their implementation, and the impact of these policies on aviation within Malaysia and throughout the region will likely become apparent. For more information on ASEAN aviation or taxation within Malaysia, please contact our specialists at email@example.com or visit us online at www.dezshira.com
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