Barely three weeks after indigenous airlines in Nigeria threatened to stop remittance of Value Added Tax (VAT) to the Federal Government, the government has bowed to the demand of the local carriers.
The umbrella body of local airlines in Nigeria, Airline Operators of Nigeria (AON) told journalists in Lagos that the Federal Government had issued Executive Order for the removal of VAT from all forms of shared transportation, including air transport.
AON said the decision by the Federal Government to remove VAT from domestic air transportation would go a long way to bring succour to groaning Nigerian travellers to be able to afford to travel by air.
The body said that this would also lead to growth in demand for domestic air travel and enhances job creation by the whole air transport service chain, which included airlines, airports, ground handlers and catering companies as well as increase revenues for government.
AON commended President Muhammed Buhari for listening to the cries of domestic airlines in the country, stressing that the decision by the government following the Federal Executive Council (FEC) Meeting of June 6, 2018 presented a veritable opportunity for the aviation industry to immediately take advantage of the decision to expedite a White Paper to that effect.
It would be recalled that AON had on May 30, 2018 threatened to from June 14, 2018 stop remittance of VAT to the coffers of the Federal Government, saying that the continuous collection of such tax negated the principle of the Federal Government and international best practises in the industry.
The airlines, rising from its meeting held at the Murtala Muhammed Airport Two (MMA2), Lagos, insisted that apart from the operators, none of the other modes of transportation remits VAT to government and wondered why they should be compelled to pay the tax to government and its agencies.
They had lamented that the current airlines were striving to sustain their operations under the “harsh operating environment,” stressing that collection of such tax further undermined their operations.
According to then, the unfavourable operating environment led to the collapse of over 50 airlines in 30years in the country and maintained that the VAT was no longer sustainable to the airlines.
Speaking on the decision, Capt. Nogie Meggison said that the operators had been clamouring for decades now for discussions on the immediate removal of VAT from domestic air transportation in line with global best practice, but no government listened to them.
He insisted that VAT was an added burden on their passengers who had limited disposal funds and had reached their elastic point in this difficult time in the nation’s economy.
He added: “This adversely affects the sector by reducing the number of those who can afford to travel by air due to high fares in this tough economic time. This has been shown to be true according to a recent report from the Federal Airports Authority of Nigeria (FAAN) that passenger traffic dropped by 27 per cent in 2017 and by another 7 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.
“Domestic air transportation in Nigeria is the only mode of commercial transportation that pays VAT. Road, rail, marine and even foreign airlines operating in Nigeria don’t pay VAT in their home country or in Nigeria with reference to an information circular by the Federal Inland Revenue Service (FIRS), which grants them VAT exemption (Information No.: 9701; Circular Dated 1st Jan. 1997); Part L (b) No. 8.”
He declared that VAT on commercial air transportation was a huge departure from what obtains worldwide and an increased burden on the Nigerian travellers.
He mentioned Ghana, Benin Republic, Togo and Cote d’Ivoire as among the countries that have abolished VAT for air transportation.
Meggison hoped that the President would go a step further to encourage the House of Assembly to pass this Executive Order into law as quickly as possible.
“This will go a long way to encourage more Nigerians to fly and put the airlines on a positive footing to grow the economy and contribute to the Gross Domestic Product (GDP). It will also encourage increased direct and indirect services that will create more jobs for our Nigerian youths thereby crowning the efforts of the President Muhammed Buhari government that has shown a lot of faith in the Nigerian domestic aviation sector with the giant strides aimed at ameliorating the challenges of the sector including the implementation of Duty Waiver on the importation of aircraft, aircraft engines and spare parts,” he said