50% Reduction In Tax On Airplane Fuel?

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Ken

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Jan 1, 2002
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From today's Sosua News:

[h=5]There is a legislative proposal for a tax reduction of 50% on aviation fuel.[/h] [h=5]50% tax reduction?[/h]
[h=5]The legislative proposal was submitted to Congress and is intended to receive more tourist flights to the Dominican Republic and to promote the tourism industry in general. Airline companies currently pay 16% tax on the fuel and this will be reduced to 8% on a proposal by President Danilo Medina. With such a tax reduction tour operators, airlines and hotel chains can offer competing packages again. There will be more frequent flights to the Dominican Republic made with all its advantages.
But it is also to achieve Danilo Medina's goal, 10 million tourists per year visiting the country.[/h]
 
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rubio_higuey

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Feb 7, 2007
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OK, the 16% tax is only a small part of the per-gallon of kerosine or avtur price, and the fuel cost is only a portion (though important) of the available seat mile. So a 50% reduction in those 16% would only have miniscule impact.

Of the most recent http://www.seic.gov.do/media/12124/Aviso Precios Combustibles 2012-277.pdf price of Avtur (RD$131 per gallon), only RD$21 of the price was due to the mentioned 16% tax. Reducing that by half, would mean that RD$10 is just 7.6% of the fuel price. According to various studies (can be googled) airline fuel cost represents 35% o the total cost. So 7.6% of the 35% is 2.66%, or in other words, the 16% -> to -> 8% tax reduction represents only 2.66% of the total saving. However, airlines usually only fuel in the DR for the next leg, or in general terms, for half the journey. That brings the 2.66% savings down to 1.33%, because we suppose that in the USA, Europe, etc where they fuel for the other "half" of the journey the Dominican tax reduction does not have or make any effect.

At the end, this whole biggo huge tax reduction all over news will only have 1.33% impact on the total airfare in general. A US$500 RT ticket, it would save passenger US$6.65, on a US$1200 RT ticket from Europe it would save US$15.6 to the passenger. Not that much at all. What would help more are the "other" taxes charged in the airline tickets, including the 16% ITBIS on the fare portion originating in the DR, plus other "government fees and taxes". Fuel tax reduction will have no effect.
 
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kdolo

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Mar 9, 2009
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rubio_higuey said:
OK, the 16% tax is only a small part of the per-gallon of kerosine or avtur price, and the fuel cost is only a portion (though important) of the available seat mile. So a 50% reduction in those 16% would only have miniscule impact.


Yes, but you forget the aggregate effect.

6$ per passenger x 2 million passengers is $12 million dollars ....... - not much individually, but in the aggregate - its extra money that people can save or use to spend on the ground.....
Click to expand...
 
beeza

beeza

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Nov 2, 2006
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That's great news!

It's something I've been harping on about for a very long time!
 
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