Facilities which come under the ruling include landing, parking, route navigation, and security.

By Patrick Appleton

The International Air Transport Association (IATA) has urged Bangladesh’s government to reconsider a decision to impose Value Added Tax (VAT) on aeronautical services for airlines operating in the country.

A directive from Bangladesh’s National Board of Revenue in November announced that VAT on services provided by the Civil Aviation Authority of Bangladesh (CAAB) would be subject to a rate of 15%. 

Those services include landing, parking, route navigation, security, boarding bridge facilities and port services.

In a letter addressed to Bangladeshi Prime Minister Sheikh Hasina, IATA Director General and CEO Alexandre de Juniac said such taxes harm the development of both air transport and local economies.

Not imposing VAT will ensure the continued development of air transport and its valuable contribution to Bangladesh’s economy

“We respectfully request you to direct the National Board of Revenue to rescind its decision to subject to VAT the various aeronautical and non-aeronautical charges levied by the CAAB on international air transport,” wrote de Juniac. 

“Not imposing VAT on these necessary services in line with international standards will ensure the continued development of the air transport sector and its valuable contribution to Bangladesh’s economy.”

IATA contends that imposition of the charges contradicts accepted policies and guidelines on taxation published by the International Civil Aviation Organization, the Organization for Economic Co-operation and Development, and the World Trade Organization.

“It is our strong contention that the aeronautical and related charges are VAT zero-rated and should not be subject to tax at 15%,” said de Juniac.

“This is because such services are directly related to, and necessary for, the operation of aircraft in international traffic and should not be considered as ancillary transport services.” 

Urging caution against the implementation of such taxes, de Juniac said that air transport is “a key contributor and enabler” to the Bangladeshi economy.

IATA statistics show that aviation generates $769 million in GDP and provides 129,000 jobs at present in Bangladesh, which could rise to $2.1 billion GDP and 140,000 jobs by 2038.

“However, the full potential that the air transport sector brings cannot be realized without a cost-competitive environment,” de Juniac warned.

Many jurisdictions, including Saudi Arabia, the EU, and Canada, do not subject most aeronautical services and related charges on international air transport to VAT.