Kenya’s aviation industry could face higher operating costs and reduced competitiveness after parliament last week passed the controversial Finance Bill 2025, which proposes reinstating value-added tax (VAT), Import Declaration Fees (IDF), and Railway Development Levy (RDL) on aircraft, spare parts, and maintenance services.
The Kenya Association of Air Operators (KAAO) has warned that the proposed measures will significantly raise costs, dampen investment, and slow the recovery of a sector still rebounding from the effects of the COVID-19 pandemic. The industry group has argued that the move risks stifling connectivity and economic growth.
On June 19, the parliament approved the bill but denied the revenue authority's request to obtain unrestricted access to taxpayers' data on account of privacy concerns and constitutional safeguards. The government is under pressure to avoid a repeat of last year's unrest after protests against proposed tax hikes led to more than 60 deaths and forced President William Ruto to abandon plans to raise KES346 billion shillings (USD2.7 billion) in taxes.
Last month, the KAAO board submitted a formal memorandum to the National Assembly Committee on Finance and Planning outlining the potential harm the taxes would cause to the aviation sector and urging lawmakers to remove the proposals from the final version of the bill.
In a statement on May 20, the KAAO voiced strong opposition to proposed changes that would scrap longstanding VAT exemptions for the aviation sector, warning this would significantly increase acquisition and service costs, affecting air travel, cargo, training, UAV operations, and emergency services.
