China raises import tax for aircraft
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The State Council of China has approved a 1% VAT increase, which will take the taxable amount on imported aircraft from 4% to 5%.
The move, which affects those with 25 tons or more of unladen weight. was announced on the Civil Aviation Administration of China’s website, meaning that airlines in China will have to pay an extra US$1.63 million for a narrow-body aircraft like an Airbus A320 or Boeing 737.
Public data shows that China had been cutting its VAT for both passenger and cargo traffic over the last few years. In 2001 the tax was 10% and was moved down to 4% in 2004.
Li Xiaojin, the head of Aviation Transport Economics & Management Sciences Research Institute of Civil Aviation University of China, believes that given the cost of aircraft is about 15% of an airline’s total operating cost, one percentage point increase in VAT equals one thousandth more operating cost, which puts those airline already facing high cost and fiercer competition under even greater pressure.
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