Stakeholders in the Nigerian aviation industry, have cried out over the Federal Government’s non-implementation of the removal of Value Added Tax (VAT) from air transportation.
This is coming four months after the President Muhammadu Buhari-led administration, issued an executive order of the VAT removal.
VAT is charged as five per cent on every flight ticket sold by airlines and is remitted to the Federal Government.
Nigerian umbrella body of Airline operators, Airline Operators of Nigeria (AON), had estimated that its members were paying over N10 billion as taxes annually, a situation the group said was threatening their operations.
Prior to the Executive Order, the AON had threatened that its members would no longer pay VAT with effect from June 14, 2018.
According to the group, VAT remittance was unfair, as only domestic airlines were made to pay, while foreign airlines were exempted.
The AON lamented that air travel was also the only mode of transportation that was subjected to the payment of VAT, which had resulted in airlines not being able to optimally utilise their aircraft assets.
“The AON’s position is that VAT on airline ticket sales for domestic carriers must be removed completely forthwith as road transportation, rail, marine and international air travel carriers are not subjected to VAT.
“Nigerian domestic airline travel is the only mode of transportation paying VAT in the country today as road, rail, marine and international airlines do not pay. Moreover, a situation whereby some airlines are paying VAT, while some other privileged airlines are not paying VAT, and the VAT which we pay is being used to subsidise our competitors against those that are making payment is unfair.” AON was quoted.
The AON lamented that a recent report by the Federal Airports Authority of Nigeria showed that passenger traffic dropped by 27 per cent in 2017 and by another seven per cent in the first quarter of 2018, making it a total of 34 per cent drop in passenger traffic within a span of one year due to the high cost of flight tickets.
President Buhari’s stance on the VAT removal
President Muhammadu Buhari has described the recent removal of VAT, as a move by the Federal Government to make air travel more affordable to citizens and to create job opportunities in the nation’s aviation sector.
The President explained that the government’s decision to charge zero VAT from domestic air transportation was in line with global best practices.
“This will make air travel more affordable and subsequently lead to the creation of jobs by the air transport service value chain as well as increase revenues for government. Today’s commissioning is an example of government’s deliberate policy to sustain the development of infrastructure for economic growth in all geo-political zones of the country,” he said.
