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The local aviation regulator, Tanzania Civil Aviation Authority (TCAA), says it will review airfares later this year to provide relief to travellers following the government's decision to scrap premium tax on aviation insurance.
Finance and Planning Minister Dr Phillip Mpango proposed for VAT exemption on aviation insurance charges in the National Assembly on Wednesday as measures to support the hatchling aviation industry.
"This measure takes into consideration that aviation industry in the country is still at infant stage and needs to be supported to be able to cover insurance risks without additional costs due to taxation," the minister said in his budget speech.
He had added that there was need to promote the aviation industry and subsequently tourism industry, noting that "the measure will allow operators to acquire insurance covers from within the country instead of offshore market".
Speaking to the 'Daily News', TCAA Director General Mr Hamza Johari said the move will reduce operational costs and hence the needs to lower air fare.
"Aviation stakeholders have for long been appealing to the government to remove VAT on aviation insurance charges ... this is positive news to the industry and will subsequently increase efficiency and foster industrial growth", he noted.
In East Africa, Kenya and Uganda abolished VAT on aviation insurance charges to support the aviation sector. Analysts say the new measures will help the state-run carrier, Air Tanzania Company Limited (ATCL), to compete.
Nevertheless, the TCAA boss called for proper investment to improve local airport infrastructures. Tanzania had beforehand been playing second fiddle to Kenya, which has a more developed tourism infrastructure and better air links to key client markets in Europe and America.
The number of tourists visiting the country jumped to 1.14 million in 2014 and is expected to clock 2 million next year, but with the new arrangement, analysts says Tanzania stands a better change to attract more tourist arrivals.
Confederation of Tanzania Industries (CTI) Director for Policy and Advocacy Hussein Kamote stated that the local air industry was now dominated by Fastjet and Precision Air. "The government's plan to restore Air Tanzania is a good idea.
This will help unlock tourist attractions in other areas with limited airline access," he said. He went on to suggest that the government should consider new routes for the national flag carrier - ATCL to foster its tourism industry.
"Air routes have remained the same but are still dominated by some airlines whilst other routes remain dormant," he noted. Airline operators prefer Dar es Salaam, Mtwara, Mwanza, Kilimanjaro, Songwe and Zanzibar routes due to improved infrastructures.
The Minister for Works, Transport and Communication, Professor Makame Mbarawa, said the government was planning to undertake major renovations on 11 airports in the country, which will help to open up new air routes.

Source: Daily News.

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