Indonesia removes import duties on aircraft parts to bring down domestic airfares
By Jet Damazo-Santos ( November 11, 2024, 06:54 GMT | Insight) -- Indonesia has removed import taxes on aircraft parts as part of efforts to bring down domestic airfares, which are among the highest in the region. According to the Indonesian Competition Commission, aircraft-maintenance costs account for about 15 percent of airline ticket prices, because aircraft components are currently imported.Indonesia has removed import taxes on aircraft parts as part of efforts to bring down domestic airfares, which are among the highest in the region. The change was one of several reforms under a recently issued finance ministry regulation on the Core Tax Administration System, which aims to streamline the country's tax administration. The regulation goes into effect on Jan. 1, 2025. Under Article 219 of the regulation, aircraft and their spare parts, as well as aviation safety equipment and repair and maintenance equipment that are imported and used by national airlines are exempt from income-tax levies. According to the Indonesian Competition Commission, or KPPU, these duties contribute to the country’s high airfare prices. “Another significant component of the ticket price is aircraft maintenance costs, which account for about 15 percent. Aircraft components are currently imported, which adds import duties,” KPPU commissioner Budi Joyo Santoso told a dialogue with the Indonesian National Air Carriers Association in September. One of the biggest contributors to high prices, though, is believed to be the monopoly of supply of jet fuel in the country. In September, Tony Fernandes, the CEO of AirAsia’s parent company Capital A, told a press conference in Jakarta that the price of jet fuel in Indonesia is about 28 percent higher than in neighboring countries in Southeast Asia, and might even be among the most expensive in the world. He attributed this to the effective monopoly behind the supply of jet fuel. That same month, the KPPU announced that a subsidiary of Indonesia’s national energy company, Pertamina, is under antitrust investigation over allegations it is illegally monopolizing the supply of jet fuel in the country (see here). The commission said its preliminary probe found indications that the company’s petroleum-trading subsidiary, Pertamina Patra Niaga, is blocking competitors by rejecting cooperation offers from businesses looking to enter the aviation-fuel market or by limiting sales to affiliates.The KPPU is also again investigating Lion Group, Indonesia’s largest private-airline company, after the company failed to comply with a 2020 price-fixing decision requiring it to notify the regulator of any policy changes that could impact market competition for two years (see here)....
Prepare for tomorrow’s regulatory change, today
MLex identifies risk to business wherever it emerges, with specialist reporters across the globe providing exclusive news and deep-dive analysis on the proposals, probes, enforcement actions and rulings that matter to your organization and clients, now and in the longer term.
Know what others in the room don’t, with features including:
Daily newsletters for Antitrust, M&A, Trade, Data Privacy & Security, Technology, AI and more
Custom alerts on specific filters including geographies, industries, topics and companies to suit your practice needs
Predictive analysis from expert journalists across North America, the UK and Europe, Latin America and Asia-Pacific
Curated case files bringing together news, analysis and source documents in a single timeline