Clipping wings: Air travel tax up by 33%-67%

Planning a trip abroad has just become costlier as the government has increased travel tax by up to 67%, in a blow to the growing travelling scene in Bangladesh.

The hike will have a direct impact on the overall expenses of individuals or businesses when planning and undertaking trips.

The National Board of Revenue (NBR), as part of its multifaceted efforts to reduce unnecessary foreign travel and create new revenue streams, included the hike in the national budget for the Fiscal Year 2023-24 which was placed before the Parliament on Thursday.  

Domestic air travellers will face a travel tax for the first time from 2023-24. They will have to pay Tk200 as travel tax for taking flights to various destinations within the country.

The tax for travelling to Saarc countries will go up by 67% to Tk2,000, by 33% to Tk 4,000 for going to Middle Eastern countries, and by 50% to Tk6,000 for the rest of the countries.

Besides, the rate is Tk1,000 if travellers use land and sea routes to go abroad.

Earlier, the tax was Tk500-4,000 for each outbound traveller depending on their destination countries and mode of transportation.

Economists opined that the government should widen the tax net rather than increase tax pressure as people are already hit hard by inflation.

"People are under pressure from price hikes. So, sudden increases in taxes will not be rational at the moment," Mohammad Abdur Razzaque, chairman of the Research and Policy Integration for Development, told The Business Standard in an earlier interview.

He believed that no taxes should be imposed on outbound migrant workers. 

The NBR collects travel tax from people travelling abroad, including migrant workers, under the Travel Tax Act 2003. The tax amounted to TK871 crore in FY22.

Syed Md Aminul Karim, former NBR member (tax policy), earlier said to The Business Standard, "The tax increase, however, is logical from the consideration that it did not increase for the past few years despite sharp depreciation of taka." 

He said the tax should be raised for those who travel to developed countries including those in Europe and America.

According to the data of the Bureau of Manpower, Employment and Training (BMET), Bangladeshi workers migrating to different countries, including Middle East ones, doubled to some 11.35 lakh in 2022. Most workers pay Tk3,000 each.

Travel tax was revised in 2014 for the last time. Before this fiscal, people who travelled to Saarc countries had to pay Tk500-1,200 each depending on their mode of transportation. The tax was Tk4,000 for each outbound traveller to North America, South America, Europe, Africa, Australia, New Zealand, China, Japan, Hong Kong, North Korea, South Korea, Vietnam, Laos, Cambodia and Taiwan. For other countries, the travel tax was Tk3,000.

In order to facilitate trade and reduce production costs, the new budget proposed to exempt Advance Tax on import of aircraft engine, turbo jet and aircraft parts imported by registered airlines.

Mofizur Rahman, secretary general of the Aviation Operators Association of Bangladesh (AOAB), told TBS, "Primarily it can be said this tax exemption will reduce the cost of importing spare parts for airlines, which ultimately will play a positive role in reducing travel cost for passengers."

However, ticket prices will increase as travel tax has been imposed, he added.