VAT Removal on Plane Tickets Could Boost Domestic Travel and Economy

The plan to abolish Value Added Tax (VAT) on domestic flight tickets is considered to have the potential to reduce air travel costs and increase public mobility. The policy is also believed to provide a multiplier effect for a number of economic sectors that depend on inter-regional connectivity. Aviation analyst Alvin Lie said air transport plays an important role in supporting public mobility in Indonesia as an archipelagic nation. Therefore, ticket affordability is one of the factors influencing economic activity and the movement of people between regions. “As an archipelagic nation, Indonesia is highly dependent on air transport to connect various regions,” Alvin said in a written statement in Jakarta on Saturday (13/6/2026). According to Alvin, the removal of VAT has the potential to make ticket prices more affordable, thereby increasing public interest in using air transport for domestic travel. “The increase in the number of domestic trips will have a positive impact not only on the aviation industry but also on other related sectors, such as tourism, hospitality, culinary, logistics, and MSMEs,” Alvin added. He considered that the taxation policy on domestic flight tickets needs to be reviewed because of the difference in treatment compared to international flights, which are not subject to VAT. “Domestic ticket prices being subject to VAT is an anomaly because going abroad is not charged VAT. Why is it charged domestically?” Alvin questioned. Alvin also highlighted other public transport modes that are not subject to VAT for passenger transport services. According to him, this condition creates different treatment between air transport and other public transport modes. “Even the most luxurious train or the most luxurious bus, whose ticket prices are close to low-cost carrier economy class ticket prices, are not charged VAT. So, why are plane tickets charged VAT?” Alvin continued. From an industry perspective, more competitive ticket prices are seen as capable of increasing the number of passengers and flight load factors. This condition has the potential to strengthen airline performance while opening up opportunities for developing new flight routes. “This condition can strengthen airline business sustainability, open opportunities for new route development, and improve connectivity to various regions that have been dependent on air transport,” he said. According to Alvin, improved connectivity will impact regional economic activity through the growth of trade, investment, tourism, and labour movement. “What is needed here is political will from the government, whether it wants to push for Indonesia’s transport industry to be more efficient, more affordable, and ultimately more developed,” Alvin said.