The Nigerian aviation industry’s concerns are being addressed by the Presidential Fiscal Policy and Tax Reforms Committee, which is concerned that the new tax laws, which are scheduled to go into effect starting January 1, 2019, will have a negative impact.
It argued that the changes were intended to lower airline operators’ operating costs and lessen the pressure.
The Committee stated in a statement posted on the company’s official X handle on Tuesday that the changes are only a part of the aviation industry’s problems, not the cause.
The reform is a component of the solution, not the solution, it said, contrary to the claim that the new tax laws will harm the industry.
It acknowledged the real challenges facing airlines, particularly the burden of numerous taxes, levies, and regulatory fees, and acknowledged the government’s ongoing cooperation with the operators.
The Committee claims that concerns about the reintroduction of a 7.5% Value Added Tax (VAT) on tickets are exaggerated because airline operations are inherently low-margin.
Read more about how the new tax laws will be implemented on January 1 as planned.
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We are aware of the real difficulties the Nigerian aviation sector faces, particularly given the complexity of the numerous taxes, levies, and regulatory fees. The picture of the president’s fiscal policy and tax reforms. https://twitter.com/sVyOX7WB4y
“Airline operations are inherently low-margin,” The Committee claimed that a 7.5% VAT on tickets in a system where input VAT is fully recoverable has a significantly lower net impact than the headline rate suggests.
The maximum impact, according to the report, would still be limited to 7% even in the worst-case scenario where VAT is not claimed.
“That is, a ₦125, 000 ticket becomes not more than ₦134, 375, and a ₦350, 000 ticket not more than ₦376, 250”, the statement added.
According to the Committee, airlines will no longer be subject to VAT because of the new tax laws, which will make it completely exempt from VAT on imported or locally produced goods, services, and consumables. The law mandates a refund within 30 days, supported by a fully funded tax refund account, where an airline has excess input VAT.
Additionally, the Committee stated that airlines will be able to use the option to offset VAT credits from other tax liabilities, which it said will help with overall sector liquidity and reduce cost pressures.
Further clarification, the Committee emphasized that airlines no longer are subject to any new import duty burdens, despite the committee’s emphasis on the status of the current import duty exemptions for commercial aircraft, engines, and spare parts.
Additionally, it addressed concerns over the numerous taxes and fees that were levied on travel and ticket prices, noting that these fees shouldn’t be attributed to the reforms and weren’t intended to be. According to the Committee, the government is collaborating with relevant organizations and airline operators to find a lasting solution.
The clarification comes in response to an earlier statement from Air Peace’s CEO, Allen Onyema, who had predicted that the Nigerian Tax Act would reimpose a 7.5% VAT on imports of aircraft parts that were initially suspended in 2020 due to the COVID-19 crisis.
According to Onyema, the move could increase domestic economy rates from 350,000 to more than 1 million.
Source: Channels TV
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