Matta president Tan Kok Liang said tourists bound for East Malaysia were already complaining of high airfares from Kuala Lumpur, which had also led to Malaysians opting for regional travel instead of local holidays.

“Adding the 6% service tax on domestic flights would be a disincentive for ‘flying local’,” he said in a statement.

“How are we to develop smaller towns and states apart from Kuala Lumpur as tourism hubs?”

Tan said domestic tourism was expected to grow this year, as inbound tourism receipts last year amounted to RM82.1 billion with domestic tourism at RM83.1 billion.

He said a service tax exemption would result in multiplier effects which in turn would add to government revenue through economic activities, especially from travel between the peninsula and East Malaysia.

While the potential of collecting sales and services tax from the entire tourism industry was huge, he added, domestic air tickets constituted only a fraction of this.

“Imposing a service tax on domestic tickets could discourage price-sensitive tourists from travelling within the country, more so when airfares for international flights are low and not subject to service tax,” he said.