Domestic Airlines Vow to Stop Paying VAT


Chinedu Eze

Airline Operators of Nigeria (AON) has vowed that from June 14, 2018, its members will stop paying Value Added Tax (VAT) to the federal government, estimated to be over N15 billion annually.

AON made this known in Lagos yesterday during a meeting of the chief executives of airlines and attributed the short life span of domestic carriers to poor infrastructure, excessive charges and taxes; high cost and inadequate supply of aviation fuel.

The airlines accused the federal government of not being concerned by the above mentioned problems, but insisted that airlines failed due to lack of professionalism in the running of their business.

The Executive Chairman of AON, Nogie Meggison, described the payment of VAT as unfair, and explained that it is only Nigerian airlines that pay the tax, while foreign carriers that operate into the country are excluded as well as other modes of transportation.

“The AON’s position is that the 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,” he said.

He alleged that the federal government is using taxpayers’ money to fund the proposed national carrier that is supposed to be private sector driven, noting that with government commitment to the national carrier, it is evident that it would not give all airlines equal operating environment.

Meggison also explained that the establishment of this national carrier had been shrouded in secrecy and lacks transparency in its entirety, adding that using tax payers’ money and its apparatus to establish an airline with a foreign core investor was not fair to Nigerian airlines and Nigerians.

Also speaking at the meeting, CEO of Top Brass Airlines, Roland Iyayi, a member of the body, said the government has provided for zero customs duty on commercial aircraft, spare parts and engines but unfortunately, in 2018, the industry was yet to fully benefit from this provision.

This, Iyayi explained, had resulted in airlines having some of their aircraft fleet grounded for days in some cases, thereby resulting in cancelled flights which in turn results in chaos at the airports to the displeasure of customers, adding that this situation is unacceptable and should be reversed forthwith.

On the Nigeria Civil Aviation Authority (NCAA) five perc ent ticket sales/charter sales charge, he said airline operators have always contended that the imposition of a percentage tax model creates a distortion in the industry.
“We have recommended and continue to recommend that the unit tax model preferred and practiced by over 90 per cent of countries globally and as recommended by the International Air Transport Association (IATA) be adopted immediately. It is worthy of note that all the industry agencies, including the NCAA regulator, are established as not-for-profit organisations, essentially designed for cost recovery.

“Unfortunately, over the years, successive governments have encouraged the sourcing and increase in internally generated revenues (IGR) by these agencies, thereby completely negating the primary purpose for which they have been established,” he added.