New tax may hurt airlines

A new tax that aims to raise revenue gained from foreign companies may actually hurt China’s airlines, the Wall Street Journal reported. The 5% leasing tax, which took effect at the start of 2009, covers services such as airline leasing by foreign companies to Chinese airlines, and will likely be passed onto Chinese airlines as price hikes. According to analysts, the costs of the new tax are likely to total between US$54 million and US$90 million for all airlines combined. The three large airlines, Air China, China Eastern Airlines and China Southern Airlines, all posted large losses for the third quarter of 2008.