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The Transportation Ministry has officially asked the Finance Ministry’s Directorate General of Taxation to reconsider a new tax on leasing aircraft that the ministry said would likely result in higher air fares.

Harry Bhakti, the Transportation Ministry’s director general for aviation, said on Tuesday that he sent an official request to the tax office last week.

“If the tax office still continues with the current regulation then it will hit the customers the most,” he said.

If implemented, the regulation would require Indonesian airlines to pay a 20 percent tax on the amount they pay to lease planes from foreign airlines. Currently, they pay only a standard witholding tax on their total revenue. They claim the new regulation, issued on Nov. 5, amounts to double taxation.

The regulation was originally set to come into force on Jan. 1, but has been delayed while the tax office conducts negotiations with the Transportation Ministry and airlines.

Based on Transportation Ministry calculations, the regulation would result in cost increases for airlines of Rp 280 (3 cents) per seat per mile, Harry said. “They will pass it on to the passengers and the ticket prices will increase,” he said.

For example, an economy seat on a Garuda Indonesia flight from Jakarta to Medan was listed at Rp 1,281,000 on Tuesday. Given the 876 mile distance between the two cities, based on the ministry’s estimate, it would amount to an extra Rp 245,280 added to the ticket price.

“The airlines already have an obligation to pay withholding tax and now they have to pay rental taxes. That’s double taxation,” Harry said, adding that the tax office should charge the foreign companies leasing the aircraft because they are the parties earning revenue from the transaction.

The tax office has said the regulation is aimed at preventing airlines from using foreign parties as a vehicle to avoid paying taxes, something it claims the airlines have been doing.

Mochamad Tjiptarjo, director general of taxation, did not respond to the Jakarta Globe’s requests for comment on Tuesday.

The aviation industry praised the Transportation Industry’s move.

Overturning the tax regulation would help Indonesian airlines stay more competitive, said Emirsyah Satar, president director of Garuda.

Emirsyah is also the chairman of the Indonesia National Air Carriers Association.

Currently, out of around 500 planes operated by local airlines around 80 percent of them were leased, he said.

The regulation would mean airlines would have to pay around $180,000 a month to lease a Boeing 737-400, up from the current $150,000 a month, Emirsyah said.

According to the tax office, the regulation contains a mechanism that would allow the airlines to avoid being double-taxed on their leasing expenditure.

However, Lion Air general director Edward Sirait said the process to take advantage of the mechanism was too complicated.