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Airlines get 3-year grace on fuel surcharge tax
By Winny Wang |
January 9, 2009, Friday
|
Print Edition
Print Edition
CHINESE airlines will be exempted from a tax imposed on fuel surcharges on domestic flights for three years as the government moves to protect the domestic aviation industry amid an economic downturn.
The exemption has been made retroactively from January 1, 2008, which means domestic carriers need not pay the 3 percent tax imposed on fuel surcharges for domestic flights until the end of 2010, and the tax that has been paid will be cut from future payments, the Ministry of Finance said on its Website yesterday.
"The exemption is expected to save airlines 300 million yuan (US$43.89 million) in total but it won't greatly improve their performance," said Li Lei, an analyst of China Securities Co. "China Southern Airlines may save 130 million to 150 million yuan from the tax exemption as it flies more domestic routes than other carriers, while Air China and China Eastern Airlines may save 70 million to 80 million yuan each."
The tax exemption is part of China's efforts to bolster the sagging aviation market. The Civil Aviation Administration of China has also said it would waive several fees and taxes.
"Domestic carriers will benefit more if the regulator suspends the collection of infrastructure funds, which will save them a total of 4 billion yuan," Li said.
China's economic planner last month cut domestic jet fuel prices from 7,450 yuan a ton to 5,050 yuan.
From December 25, fuel surcharges on routes shorter than 800 kilometers were slashed to 20 yuan from the previous 80 yuan, and on long-haul flights, they fell to 40 yuan from 150 yuan.
The exemption has been made retroactively from January 1, 2008, which means domestic carriers need not pay the 3 percent tax imposed on fuel surcharges for domestic flights until the end of 2010, and the tax that has been paid will be cut from future payments, the Ministry of Finance said on its Website yesterday.
"The exemption is expected to save airlines 300 million yuan (US$43.89 million) in total but it won't greatly improve their performance," said Li Lei, an analyst of China Securities Co. "China Southern Airlines may save 130 million to 150 million yuan from the tax exemption as it flies more domestic routes than other carriers, while Air China and China Eastern Airlines may save 70 million to 80 million yuan each."
The tax exemption is part of China's efforts to bolster the sagging aviation market. The Civil Aviation Administration of China has also said it would waive several fees and taxes.
"Domestic carriers will benefit more if the regulator suspends the collection of infrastructure funds, which will save them a total of 4 billion yuan," Li said.
China's economic planner last month cut domestic jet fuel prices from 7,450 yuan a ton to 5,050 yuan.
From December 25, fuel surcharges on routes shorter than 800 kilometers were slashed to 20 yuan from the previous 80 yuan, and on long-haul flights, they fell to 40 yuan from 150 yuan.
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