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Treasury eyes Sh38bn from the rich with helicopter tax

Politicians and wealthy Kenyans seeking to hire helicopters or buy planes will have to spend more cash following a proposal by the National Treasury to reverse the tax exemption on the aircraft.

In a new tax measure announced by the Treasury Cabinet Secretary Ukur Yatani, persons seeking to hire or buy aeroplanes of an unladen weight not exceeding or exceeding 2,000 kilogrammes will now pay 14 percent in value added tax (VAT). The move is aimed at collecting an additional Sh38.9 billion from wealthy individuals and industries.

Previously, purchase of certain types of helicopters, aeroplanes and aircraft gear as well as parts like tyres did not attract any tax. The exemption also applied to individuals seeking to lease or hire helicopters, but the latest proposals mean the cost of leasing or hiring will raise.

It costs between Sh150,000 to Sh400,000 per hour to hire a chopper in Kenya.

Kenya Association of Air Operators (KAAO), the umbrella body of air operators’ executive secretary Eutychus Waithaka has, however, opposed the introduction of taxes saying the move will hurt operations in the aviation sector.

“We don’t support the reintroduction of taxes and duties that were previously waived or exempted for the aviation sector. We have been fighting that the sector be exempted from extra taxations as this will impact heavily on our operations,” he said in a response to the Business Daily query Thursday.

The new tax measure by Mr Yatani comes in place barely a few years the Value Added Tax Act of 2014 exempted taxes on “helicopters of an unladen weight not exceeding 2,000 kg” and “helicopters of an unladen weight exceeding 2,000 kg”.

The unladen weight of any aircraft is the weight when it is not carrying any passengers, goods or other items.

It includes the body and all parts normally used with the aircraft when it is used.

Essentially, by exempting from taxes helicopters “not exceeding” and those “exceeding” 2,000kg, the law made all helicopters tax exempt.

The new tax measures also come barely four months after the Kenya Civil Aviation Authority (KCAA) registered 87 new aircraft last year, up from 48 fresh listings in 2018, pushing the number of planes in the country to 1,548, excluding those owned by the National Police Service and the Kenya Defence Forces.