Aviation industry asks for tax break due to COVID-19

March 18, 2020 - 13:23

The Ministry of Transport has proposed Prime Minister Nguyễn Xuân Phúc cut several taxes and service prices for the aviation industry, which is being heavily affected by the COVID-19 pandemic.


Vietnam Airlines is among Vietnamese airlines suffering the impact of COVID-19. The carrier has temporarily stopped many routes from countries of Europe and Southeast Asia. — Photo Vietnam Airlines

HÀ NỘI — The Ministry of Transport has proposed Prime Minister Nguyễn Xuân Phúc cut several taxes and service prices for the aviation industry, which is being heavily affected by the COVID-19 pandemic.

In a report sent to the Ministry of Planning and Investment, which is in charge of collecting proposals from affected sectors, the transport ministry wanted the Government to reduce take-off and landing prices, as well as flight operation service fees for departures and arrivals of domestic flights, by 50 per cent.

This policy is expected to apply from March 1 to May 31 this year.

At the same time, the ministry asked the Government to apply a minimum tax and fee of zero đồng for specialised aviation services, including catering, ramp and push back services, in order to create conditions for businesses to provide discount services for airlines and businesses.

The transport ministry also proposed the Government to assign the Ministry of Finance to consider the exemption of import tax and environmental protection tax on jet fuel for three months.

“In case of budget difficulties, it’s expected to cut 50 per cent of import tax, environmental protection tax on jet fuel and allow enterprises to extend tax payment time and budget contributions,” the ministry said.

Airlines have stopped all flights to China and South Korea, reduced 34 per cent of flights to Taiwan, making up 99 flights per week. Meanwhile, the Hong Kong route also reduced by 92 per cent, leaving the national carrier Vietnam Airlines flying only four flights a week compared to 47 flights a week previously.

The Japan route still hosts 160 flights per week, but the airlines are assessing the situation and the possibility of further cuts.

Vietnam Airlines yesterday announced that it has temporarily stopped flights between Viet Nam and France until further notice from authorities. The routes between Việt Nam and England and Germany are still running as planned.

In Southeast Asia, Vietnam Airlines temporarily suspended flights between Việt Nam and Malaysia from March 18 to March 31 because the Malaysian Government is blocking the border during this time. The airline will consider plans to cut and reduce routes in Southeast Asia due to disease outbreaks and new regulations from the Vietnamese Government related to entry and isolation.

The Civil Aviation Administration of Việt Nam has recently issued two scenarios. The first one is that if the disease is controlled before April, the total number of passengers will reach 67 million, down 15 per cent compared to 2019.

The second one, in case the market worsens, and the pandemic is controlled in the second quarter, the total market reaches 61.2 million passengers, down 22.6 per cent year-on-year.

According to the estimations of Vietnamese airlines, the transport ministry said that the initial damage due to stopping the routes is about VNĐ30 trillion (US$1.3 billion).

The Vietnamese airlines are among others around the world suffering heavy impact caused by COVID-19.

Preliminary estimates of the International Civil Aviation Organization (ICAO) last month indicated that the first quarter of 2020 has instead seen an overall reduction ranging from 39 per cent to 41 per cent of passenger capacity, or a reduction of 16.4 to 19.6 million passengers compared to what airlines had projected.

“This equates to a potential reduction of US$4 to $5 billion in gross operating revenues for airlines worldwide,” ICAO said.

The ICAO also said the impact of the COVID-19 outbreak on the aviation industry is expected to be greater than that of the SARS epidemic in 2003 because the number of flights to cancel was much higher than before.

Proposals for waterway and railway transportation

The transport ministry asked the Government to report to the National Assembly for consideration and approval of the reduction of value added tax on container shipping from current 10 per cent to 5 per cent, thereby creating a competitive advantage for transport services.

The Government is also expected to direct Hải Phòng City People's Committee to consider not collecting infrastructure charges for import and export cargo containers transported by waterway. Meanwhile, the Committee for State Capital Management at enterprises should reduce operating fees for trains affected by the pandemic in order to maintain operation.

For maritime services, COVID-19 caused a reduction of about 15 per cent in the number of transport ships entering and leaving Vietnamese ports in the first quarter of 2020. In particularly, ships carrying international tourists to Việt Nam decreased by 30 per cent year-on-year. — VNS