Charter flights tax elicits opposition

CAIRO - 4 August 2017: The Egyptian Tax Authority has recently obliged travel agencies to pay a tax worth 20 percent of the amounts they received in support to operate charter flights retroactively since 2009.

In 2001, the Ministry of Tourism offered incentives to travel agencies in Egypt in a bid to boost charter flights, with the aim of attracting tourists to the country.

Agencies are required to pay taxes for the incentives they have received since 2009, amounting to LE300 million.

The introduction of the new tax was rejected by all travel agencies, saying that it adds a new burden on them in a time when tourism in Egypt is still suffering.

In 2003, the government has increased the incentives for travel agencies in the wake of the 1997 terrorist attack in Luxor.

Besides boosting charter flights, these incentives were meant to offset the losses operators might incur as a result of empty seats on the flights.

However since travel agencies in Egypt work as mediators, the incentives have been transferred to the cooperators, which organize trips to Egypt.

Elhamy Al-Zayat, ex-head of the Egyptian Tourism Federation told Egypt Today that travel agencies will need to pay back some LE70 million as a result of this decision. He added that travel agencies do not have this amount as they have been transferred to foreign companies and tour operators outside the country.

“Travel agencies are just mediators to deliver this amount to co-operators. In addition, these amounts were allocated without imposing taxes on them,” Zayat explained.

Acting head of the Egyptian Travel Agencies Association Karim Mohsen agrees with Zayat, saying that incentives have been transferred to co-operators, so travel agencies should not be asked to pay a tax on amounts they do not have.

He told Egypt Today that his association is in contact with the Ministry of Tourism and Egyptian Tax Authority to reach a suitable solution for all parties.

He added that that Egypt’s tourism industry is ailing and does not need more challenges to face.

Vice chairman of the International Air Transport Association (IATA) Yosri Abdel-Wahab called upon relative parties to review this step, warning that competitive markets, such as Turkey, Dubai, and Malaysia, will make advantage of this situation to attract tourists, he told Egypt today.

On the other hand, Deputy Minister of Tourism for Travel agencies Mohamed Shaalan revealed to Egypt Today that a committee including representatives from the Ministry of Tourism, Egyptian Travel Agencies Association and Tax Authority will discuss this issue.
Shaalan said that it is the state’s right to collect taxes from charter flights’ activities, which comes in light of the government’s tax system amendments.

Tourism revenues fell to $3.4 billion in 2016, 44.3 percent down from 2015, after Russia and Britain halted flights to the Red Sea resort of Sharm El-Sheikh after a Russian airliner crashed over Sinai in 2015, according to central bank figures.

The number of tourists visiting Egypt is still well below pre-revolution levels, when some 14.5 million tourists visited the country in 2010, according to state statistics agency CAPMAS.