Vietnam Airlines has announced that from January 1, 2010, airfares will increase by between 14,000 and 81,000 dong on domestic trips using economy tickets. As a result, travel firms have also immediately announced adjustments for tour fee.

The airfare increase has been explained by the fact that as a result of Value Added Tax Law, which took effect on January 1, 2009, the airfare bears the VAT rate of 10 percent instead of five percent as currently applied.

In general practice, the Ministry of Finance always releases circulars to guide the implementation of new laws. However, in this case, the ministry did not release any guidance for the VAT law implementation in 2009. Therefore, air carriers, which set up airfare levels for 2009 already, decided to keep them at five percent VAT for 2009. This means that in 2009, air carriers bore the additional five percent VAT for passengers.

However, this will not be repeated in 2010.

Currently, airfares for domestic routes announced by Vietnam Airlines and Jetstar Pacific both include five percent VAT. However, in 2010, the airlines will follow the international practice and announce airfares without tax, charges and surcharges.

As a result of the airfare increase, a number of travel firms have also adjusted their tour fees.

Nguyen Minh Man from Vietravel said the tour fee would increase by between 5 and 7 percent from January 1, 2010.

Deputy director of Hanoi Redtours Nguyen Cong Hoan also said its customers will have to pay 2.5 percent more, adding that airfare account for some 50 percent of tour costs.

Meanwhile a number of travel firms have complained that the five percent VAT increase has been announced too late and does not give enough time to them to react accordingly.

Hoan said travel firms would have to negotiate with air carriers regarding the airfare. He explained that in many cases, clients would have booked tours before Vietnam Airlines made their announcement. The sudden airfare may force travel firms to renegotiate with customers.

VietNamNet