Nigerian Airlines Spend over N10bn Annually on Taxes

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Chinedu Eze

Nigerian airlines pay over N10 billion on taxes annually, according to recent estimates by airline Operators of Nigeria (AON). The AON said the huge taxes undermine profitability and threaten the ability of the airlines to maintain their aircraft overseas.

These taxes are paid by commercial airlines in schedule services, charter airlines and companies that provide services to oil and gas companies, including Bristow, Caverton, Aero and others

The Chairman of AON, Captain Nogie Meggison noted that the taxes levied on airlines seem to indicate that government and its agencies do not want air transport to thrive in Nigeria adding this explained why domestic carriers have very short life span of average of 10 years.

The operators lamented that with such huge taxes, it has become very challenging for them to source funds and ferry their aircraft overseas for C-check and other checks, which could cost as much as $2 million.

The operators therefore urged the federal government to review these charges downwards as a kind of incentive to ensure airlines operate profitably, considering the pivotal role they play in Nigeria’s economy.

AON said due to the huge taxes airlines pay, in the last 25 years about 27 aircraft had gone under.

The operators said these taxes are stifling their operations and government’s seeming indifference or inability to take action indicates they don’t care if all the airlines go under, even as they noted that with fair commitment government could ensure that aviation fuel is produced locally and piped directly to the airports.

They also stressed the need to have Maintenance, Repair and Overhaul (MRO) facilities in NIgeria, which would not only save airlines foreign exchange but would also earn the country huge revenue in dollars.

“Domestic airlines, on the average, pay about 35 percent to 40 percent of a ticket cost as taxes and charges that come under the guise of statutory levies in addition to other charges, Meggison said.

He explained that these taxes and charges amount to double taxation such that any incentive seemingly provided by the government to airlines is taken back by the agencies.

Megisson said the Nigerian Airspace Management Agency (NAMA) charges domestic airlines different kinds of navigational charges, which they should ordinarily be exempted from in line with global best practices, except Nigeria.

“The implemented charges range from Terminal Navigational charges to enroute navigation charges, Over-flight charges, clearance charges, and extension charges. Even foreign airlines don’t pay enroute charges or extension charges, which the local airlines are forced to pay.

In spite of all these charges, NAMA still gets 23 percent taken from NCAA 5 percent Ticket Sales Charge (TSC) account. Even with all these charges, many of the airports in the country do not have runway lights and navigational landing aids. This means such airports are only open between 7am and 6pm daily. To this end, airlines can’t fully utilise their airplanes for 24-hours operations. No airplane or factory machine can be profitable only from 7am to 6pm daylight operations. Airplanes and factory machines are supposed to operate for 24-hours.

He said airlines also sometimes have to pay arbitrary extension fees or cancel a flight entirely with the attendant burden and inconvenience due to no fault of theirs.

“The open ended 5 percent TSC is to say the least ambiguous and open to debate and manipulations. Ticket prices differ from one airline to the other, hence it precludes that different airlines are charged varying amounts for the same service. It also implies that an airline is being charged different amounts at different times for the same service since prices are not static. Rather than a flat 5 percent of ticket cost, the TSC should be a fixed charge like standard global practice of N1000 per ticket,” Captain Meggison said.

He remarked that the existing Nigerian VAT Law states that all forms of commercial transportation are exempted from VAT. Only Nigerian carriers are subject to pay VAT.

“Air transportation in Nigeria is subjected to 5 percent VAT contrary to the law, road, maritime and rail transportation don’t pay VAT. Even foreign airlines operating in Nigeria don’t pay VAT,” Meggison noted.