â€¢ Agency insists airlines must pay VAT
By Chinedu Eze and Nume Ekeghe
The recent revelation that Nigerians and Nigerian businesses own and operate 29 private jets that are registered in South Africa, has attracted the attention of the Executive Chairman of the Federal Inland Revenue Service (FIRS) Mr. Tunde Fowler, who has vowed that his agency would ensure they do not evade tax.
Fowler said this while speaking at the â€œFIRS and Global Forum on Transparency and Exchange of Information on Tax Purposes workshop in Lagos at the weekend.
Fowler also stressed that information sharing within African countries as well as other international counterparts would help curb illicit funds being laundered to other countries.
The FIRS boss explained: â€œI did find out information that Nigerians and Nigerian organisations have 29 private jets registered in South Africa and the issue is, how much tax do they pay here?
â€œWe are not even talking about the issue of how they got the money to buy the jets, but first of all how much tax they have paid to the Federal Government of Nigeria and the issue to their source would be dealt with later on.
â€œFor Africa, it is important we help each other. And the only way we can help each other is through automated exchange. Each African country present here today needs to maximise its revenue through taxation. And the only way to maximise it is when we exchange information.â€
Using the example of the notorious kidnapper who took illicit funds to invest in prime properties in South Africa and Ghana, as well as oil mogul, Mr. Kola Aluko who bought a $59 million penthouse in the United States, saying if tax records were crosschecked these countries would know they werenâ€™t in a position to buy such properties and make the investments.
â€œAnother issue that was in the news some weeks ago was one of the most expensive penthouse suites in New York that was foreclosed and was bought by a Nigerian called Aluko, who was involved in oil scams.
â€œThe issue is that some countries may say ask no questions but the US that allowed that individual to buy a $59 million apartment without asking questions also has a scheme now for all Americans that have investments or bank accounts outside America.
â€œThey have given the countries where they have those accounts a certain time limit to provide the information to them even without any international legal agreement. So if developed countries can be looking at their bottom line in terms of tax revenue, we also should.â€™
Continuing, he said: â€œThere are two aspects to this exchange of information â€“ one is the issue of security and the other is the issue of lost revenue.
â€œI think the more we work together through this automatic exchange of data, the better it is for all of us.â€
In his contribution, the Deputy Head of the Global Forum, Mr. Donal Godfrey said: â€œOne hundred and one countries have committed to exchange financial accounting automatically, 50 beginning in a few weekâ€™s time and another 51 in 2018.
â€œThese countries include all of the financial centres of the world that hold assets from other countries from around the world. We think it is really important African countries join because at the moment we have only two African countries committed, which are South Africa and Ghana.
â€œThere have been talks about $50 billion leaving Africa yearly and at the Global Forum, we believe the exchange of financial accounts and information would help.â€
Similarly, the FIRSÂ has said it does not have the power to stop airlines from paying value added tax (VAT), which air operators of all modes of transportation must pay.
Airlines have for often complained that they pay too many taxes and levies and this has contributed to the short life span of airlines in Nigeria and have pushed for exemption from paying VAT.
But Fowler, at a meeting with the Airline Operators of Nigeria (AON) at the weekend in Lagos, said that the agency does not have power to stop airlines from paying VAT and urged them to take the matter to the presidency.Â
Fowler, however, pledged that it would assist domestic airlines to remain afloat under the challenging macro environment while also encouraging them to meet their VAT remittance obligations.
Fowler who met with the Chairman of AON, Captain Nogie Meggison, other executive members of the association and officials of the International Air Transport Association (IATA) said: â€œWe agree that the airline industry is challenged. Government is not out to make profit but to make life more comfortable for the people.
â€œExemptions on tax issues are beyond FIRS as we do not make the law. So all we can do is offer to make it easier to give domestic airlines a soft landing by meeting them halfway in order to obey the tax laws.â€
Fowler said he understood the many challenges and multiple charges airlines were faced with and urged the operators to engage the presidency through the Department on the Ease of Doing Business, the Senate and the Minister of Finance on how the laws could be amended so that airlines could be placed at par with their competitors in the transportation industry elsewhere.
Meggison, in response said: â€œIf VAT were to be removed, it will make it more affordable for passengers with less funds at this time of economic recession to be able to fly, thereby increasing the turnover generated by airlines and resulting in increased revenue to FIRS from more passenger traffic; more landings and this will be a boost to other direct and indirect businesses linked to the aviation industry.
â€œBut there is need to take a look into the issue of fairness with respect to our competitors, clarity on the automation of tax processes as well as a 30-day period to allow for invoicing, reconciliation and billing before payment.â€
Meggison described the FIRS bossâ€™ suggestion to the airlines as a step forward aimed at alleviating one of the many challenges that has consumed no fewer than 25 airlines over the years.
He disclosed that going by a recent study, the greatest competitor to airlines in Africa was not low cost carriers but road transportation and expressed regret that road, marine and rail transporters do not pay VAT, while domestic airlines pay.
He added that even foreign airlines do not pay VAT both in Nigeria and in their home countries.Â
IATA Area Manager, South West Africa, Dr. Samson Fatokun also pointed out that airlines in Nigeria have an average mortality rate of about 10 years, noting that there was an inherent problem in the environment that continues to lead to this mortality rate and called on the FIRS to view the issue as a case for airlines to survive and the industry to be sustained.
He observed also that about 60 per cent of tickets sold are sold by travel agents and that airlines donâ€™t get the money until two weeks later via the Billing and Settlement Plan (BSP) or 45 days later due to the credit offered to the agents.
Fatokun added that it would not be fair if the proposed automation of airline VAT remittance is charged real time immediately after ticket sales for monies that airlines were yet to receive and called on FIRS to look at the bigger picture and consider ways to help sustain the aviation sector.