No easy ride as Bill seeks to end helicopter tax waivers

IDF and RDL exemptions shall remain applicable only on aircraft imports exceeding 2,000 kilogrammes or two tonnes, benefitting commercial airliners whose aircraft generally exceeds the two-tonne mark.

Parts of aircraft shall also continue to enjoy the exemptions from IDF and RDL whose rates are set at 2.5 percent and two percent of the custom values of imports respectively.

“The Bill proposes to delete the blanket import declaration fee and railway development levy exemption that applies to aircraft including helicopters," Alex Mathini, a Partner at Bowmans Kenya, said.

The Finance Act, 2023 had scrapped both the application of IDF and RDL on parts and aircraft after their imposition by the Uhuru Kenyatta administration.

This led to controversy as the rich got tax breaks while middle-class and low-income workers lamented over a new set of taxes and levies that were aimed at funding an ambitious pension, healthcare and housing plan.

Read: Rich Kenyans to import choppers cheaply as Ruto scraps taxes

Outside of commercial airlines and entities such as Kenya Power, the Kenya Police and the Kenya Wildlife Service (KWS), helicopters have proved popular among wealthy individuals and politicians.

During elections for instance, politicians spend an estimated Sh150,000 and Sh400,000 per hour to hire helicopters, which made them the largest beneficiaries of prior tax rebates.

The slapping of the IDF and RDL on aircraft with under 2,000 kilogrammes or two tonnes is expected to impact smaller craft such as helicopters which are popular amongst politicians.

Aircraft parts such as propellers, balloons, gliders and hand gliders are set to remain under IDF and RDL exemptions.

The move to reinstate the taxes on aircraft aligns with the Treasury’s objective to get rid of multiple exemptions following the advisory of the International Monetary Fund (IMF) prior.

Former Treasury Cabinet Secretary Ukur Yatani said previously that the country was not getting any benefit from the exemptions on aircraft.

Mr Yatani instead argued that most helicopters were being used by wealthy individuals and businesses to move around instead of humanitarian purposes such as flying patients from remote areas.

The value of imported aircraft and associated equipment rose to Sh24.8 billion in 2023 from Sh15.1 billion in 2022, according to the 2024 economic survey report by the Kenya National Bureau of Statistics (KNBS).

The bulk of aircraft and parts imports during the year were sourced from the United Kingdom.

“Over the review period, imports from the United Kingdom registered an increase of 17.7 percent from Sh34.7 billion to Sh40.9 billion. The growth was partly on account of increase in the importation of aeroplanes and other aircraft,” KNBS noted.

The rise in aircraft imports coincided with increases in aircraft movements, with overflights across Kenya’s airspace increasing by 34.8 percent to 63,771 in 2023 from 47,296 in 2022.

Domestic aircraft movements accounted for 58.2 percent of all movements but were lower than 63.7 percent in 2022.

Other aviation indicators such as air transport pilot and commercial pilot licences, private pilot and student pilot licences and cabin crew member certificates and aircraft maintenance engineers were also on the rise in 2023.

The number of aircraft with valid certificates of airworthiness (COA), however, dropped from 726 in 2022 to 723 in 2023.

For politicians, owning a helicopter is seen as a builder of massive appeal and a mirror to one’s financial might to the electorate. The list of Kenyans to dominate aircraft ownership includes top businessmen, large-scale farmers and corporate executives.

→ [email protected]