Nigerian govt removes 7.5 percent VAT from airfares, aviation services

The Federal Government (FG) has again suspended the deduction of 7.5 percent Value Added Tax (VAT) on airfares and other air transport services.

This was contained in the 2020 finance act recently signed by President Muhammadu Buhari and scheduled to take effect on January 1, 2021.

According to Techeconomy.ng, a member of the bill drafting committee and West Africa Tax Lead, PwC Nigeria, Taiwo Oyedele, confirmed the latest suspension on Wednesday, January 6.

Daily Correspondents recall that this came about three years after a similar order was given by the government.

The FG had earlier suspended five percent charges on imported commercial aircraft and spare parts.

Airline operators launched formal complaints that Nigeria is the only country that still charges VAT on air transport services.

The Chief Executive Officer (CEO) of Med-View Airlines Plc, Muneer Bankole,  disclosed that he heard of the then removal but that it was never implemented.
  
Bankole said: “Since we heard about it, we have started talking to FIRS, but they are still chasing us (to pay VAT).
  
“Definitely, you know that commercial operations like airlines have international connections; you don’t pay VAT anywhere in the world. So, let us do the right things here.”

“All these charges; VAT and taxes don’t apply to aviation because they don’t help the airline business. That is why our airlines are nose-diving and government agencies just sit down looking.

“They (regulatory agencies) should get out of this colonial approach. Every government agency should go out, fend to get money, and work as a real service provider.

“That is the way to go. When you say you are committed to paying five percent to this, four per cent to that, three percent to another, and so on, then you are still in the colonial era.”

Speaking about the development, the former chairman of the Airlines Operators of Nigeria (AON), Capt. Nogie Meggison, said they had been for decades seeking immediate removal of VAT from domestic air transportation in line with global best practice.
  
Meggison said: “VAT is an added burden on our passengers who have limited disposal funds and have reached their elastic point in this difficult time in the nation’s economy.
  
“This adversely affects the sector by reducing the number of those who can afford to travel by air due to high fares in this tough economic time.

This has been shown to be true according to a recent report from the Federal Airports Authority of Nigeria (FAAN) that passenger traffic dropped by 27 percent in 2017 and by another seven percent in the first quarter of 2018 making it a total of 34 percent drop in passenger traffic within a span of one year.”