Sri Lanka mulls cutting excessive airport fees to boost tourism
ECONOMYNEXT – Sri Lanka is reviewing how to reduce airport fees to make the country more competitive with the rest of Asia and make the country more attractive to tourists Sri Lanka’s tourism minister said.
"A review is being done as to how best we could reduce the landing charges, fueling charges and airport taxes," Amaratunga said.
He admitted that excessive airport fees are being passed on to airline ticket prices to Sri Lanka, making the country less attractive for potential tourists.
Sri Lanka has a state monopoly supplying fuel at the airport and there is no competition. When fuel supply is competitive if there are procurement irregularities and the petroleum firm pays high prices to buy fuel, it will lose out to competition.
While many East Asian airports are also state-run, their fees are lower.
For example in a Colombo-Kuala Lumpur Colombo ticket sold by Malaysian Airlines for 34,656 rupees, the Colombo Malaysia leg is 19,918 rupees and the KL Sri Lanka leg is 14,738 rupees.
Airport embarkation fees and taxes in Malaysia is 2,874 rupees and in Sri Lanka 8,094 rupees. Airport taxes are 40 percent of the ticket price in Colombo.
On Malindo Air, in a ticket priced at 41,348 rupees, out of taxes of 10,968 rupees, 8,094 are for Sri Lanka.
Meanwhile Amaratunga said discussions are ongoing on other taxes as well.
Sri Lanka also has value added tax and nation building tax on tourist products, which however is a reasonable given the need to broadbase taxes and end exemptions.
However in many countries VAT paid by tourists is reclaimable.
There is however a need to collect tax from the sector as many of the larger hotels that have come up have tax holidays and taxes like the NBT are simple to collect especially if booking engines could remit them directly to the state.