Fewer taxes to expand domestic flight connections

por The Winners
Article writer by Eduardo Sanovicz, President of ABEAR

The state programs for reducing State VAT (ICMS) rates on aircraft fuel (QAV) on domestic flights has been an example of efficient public policies for encouraging domestic flight connections, moving the Brazilian market much closer to the best international standards in commercial aviation.

In São Paulo, the agreement that reduced ICMS tax on QAV from 25% to 12%, beginning in July 2019, has exceeded all expectations, and the airline companies have extended their commitment with the state government: 490 new weekly departures were expected, and we have already delivered 700, in other words, 210 new flights more than was agreed.

By exceeding their contribution, the airline companies are contributing to creating income and jobs not only in São Paulo but also in every city that benefits from the new flights in 22 different states of the union.

This, therefore, will lead to economic development, as more people flying means more business being done and more people enjoying tourism. The benefits resulting from the agreement with the São Paulo state government affect 52 economic sectors, and the expectation for the next 12 months is to generate 59,000 jobs and R$ 1,4 billion in wages paid, contributing to a positive fiscal situation.

In other words, the state treasury will end up with higher tax receipts than before the reduction. This is the major benefit of substituting taxation with production.

Historically speaking, questioning the ICMS tax levied on aircraft fuel has been one of the major flagships of commercial aviation for two basic reasons.

Firstly, because Brazil is a signatory to international trade agreements in which there is no provision for a similar tax elsewhere. Secondly, because we are working so that the rules that prevail globally also apply in Brazil, whereby, in the final analysis, the work and business environment within the industry will always benefit the consumer.

Every time something different happens, that is, when Brazil invents rules that only apply here, with nothing similar elsewhere, this makes the entire system more expensive, and passengers end up paying more. It is worth pointing out that we are talking about a transport modal that enjoys no kind of subsidy, sustained exclusively by the services it offers consumers.

Moreover, it is always important to remember that the air transport industry has been under pressure from the appreciation of the US dollar against the Brazilian Real since more than half the costs of airline companies are priced in dollars.

Another serious problem is the excess of judicialization fostered by “vulture sites” that encourage passengers to file lawsuits against the airline companies, even after the complaint has been resolved directly through traditional consumer service channels. This year alone, this habit could generate additional expenditures of R$ 500 million. 

It is essential to emphasize that one of the key aspects of the ABEAR agreement with the São Paulo State Government is the partnership with the São Paulo Convention & Visitors Bureau and the State Tourism Department in promotion and marketing actions in the wake of the São Paulo para Todos (São Paulo for Everyone) program whose results can now be seen in the positive impact that the higher volume of passengers is generating in the hospitality sector, gastronomy, events such as Carnaval and in a range of other segments within the São Paulo tourism production chain.

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