‘How Customs Tariff, VAT Waivers Will Help Airlines’
On January 28, 2021, when Air Peace received its first brand new aircraft from Embraer, the Chairman of the airline, Allen Onyema used the ceremony to let Nigerians know what the Buhari-administration did for the aviation industry.
He told his audience about the waiver government gave the domestic airlines on Customs Tariff and VAT, which was an Executive Order on exemption of Customs tariffs and VAT for the commercial operators.
The waivers are expected to save airlines estimated N3 billion to N5 billion annually and such money could be ploughed to other areas like training, he estimated.
Air Peace Chairman while delivering a speech during the ceremony to receive the new aircraft in Abuja, had explained how the airlines worked with the Ministry of Aviation to secure the Executive Order from President Muhammadu Buhari and its many benefits.
“The Minister of Aviation, Senator Hadi Sirika, the Chairmen of Senate and House Committee on Aviation, Senator Smart Adeyemi and Hon. Nnoli Nnaji and Airline Operators of Nigeria (AON) worked assiduously to help aviation industry secure the waivers.
“I especially thank the President of Nigeria for making it possible. Today as this plane has come in we are not going to pay customs duties on the plane and 12 others that will come after it.
“Senator Adeyemi, and Hon. Nnaji, we owe all of you a great deal for this feat. What we at AON did was to present those challenges that have been bringing down airlines in Nigeria and we moved to meet the National Assembly Committees on Aviation, and they said the best place to do this is to use a legislation to do it. We met our Minister who took it upon himself to make sure that these things were removed to enable airlines prosper in this country,” he had said.
He gave kudos to Sirika who pushed the request through the National Assembly and the Presidency and ensured that the Executive Order was signed by the President.
Former CEO of Aero Contractors, Captain Ado Sanusi told THISDAY that the waiver could save the aviation industry about N3 to N5 billion annually, depending on the level of transaction in that particular year, if effectively implemented by the Nigerian Customs.
He said that the waiver could be up to five to seven per cent of the cost of aircraft engine, for example, which could be purchased for $5 million and the airline would pay up to 5-7 per cent of that amount.
Sanusi also explained that the airlines may not gain directly from the waiver on VAT but it will bring down the cost of air ticket, which could serve as incentive for more people to travel by air because airlines collect the money from passengers and remit them to government.
“If Nigerian Customs Service implements the waiver well it will save the aviation industry between N3 billion to N5 billion annually, but VAT will not save airlines anything but it will reduce the cost of tickets.
“This will enable airlines have more cash flow. So if Customs waivers is fully implemented the industry will benefit but right now it is not being implemented well,” he said.
Speaking on the benefits of the waivers, the Director of Engineering, Ibom Air, Lukeman Animaseun, told THISDAY that the waiver would save Nigerian carriers a lot of money, lamenting about how the taxes eroded the finances of Nigerian airlines in the past, stating that Customs still demand some taxes from airlines on aircraft spares and equipment, explaining that what airlines pay now could not be described as duties but they still pay some kind of taxes to Customs.
“There is zero duty on imported spares and aircraft but we still pay some kind of tax, which is 1.5 per cent of the cost of the spares you are importing. This one is not Customs duty or tariff, but it is a kind of tax; so we still pay.
“So if you buy aircraft for $50 million and you pay 1.5 per cent of that amount as tax that is a huge some. But that will be more than double if you pay 5 per cent duties on it. But I hope that Customs will follow the Executive Order signed by the President and exempt airlines from paying those taxes,” Anumaseun said.
It was Customs’ failure to abide fully with the Executive Order that prompted the House Committee Chairman on Aviation, Nnaji to call on Customs to respect the new government policy of total exemption of duties on imported aircraft and spares, he said.
“The House of Representatives Committee on Aviation has condemned the continued collection of import duties on imported commercial aircraft and spare parts despite the President Muhammadu Buhari’s executive order exempting them,” Nnaji had said.