AON calls for removal of VAT for domestic air transport in Nigeria

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(R – L) DR. SAMSON FATOKUN, AREA MANAGER - SOUTH WEST AFRICA, IATA; SIR NOGIE MEGGISON, CHAIRMAN,AON; DR. BABATUNDE FOWLER, CHAIRMAN, FIRS; MR. JACKY HATHIRAMANI, MD, DANA AIR; MR. EWOS IRORO, ASST. SECRETARY, AON; MR. ALLEN ONYEMA, MD, AIR PEACE.

The Airline Operators of Nigeria, AON, has appealed to the Federal Inland Revenue Service, FIRS to remove VAT for domestic air transportation in Nigeria.

Chairman AON, captain Nogie Meggison who made the appeal during a visit to the FIRS office in Abuja, said if VAT were to be removed it would make it more affordable for passengers with less funds at this time of economic recession to be able to fly.

He added that this would also increase turnover generated by airlines, increased revenue to FIRS from more passenger traffic, more landings and a boost of other direct and indirect businesses linked to aviation.

“Accra has become the hub for doing business in West Africa today due to the fact that Accra has adopted a deliberate economic policy to make Accra a hub for West Africa and as a way of achieving this has adopted zero VAT for air transportation and also lowered taxes on JetA1 by 25% which has attracted more airlines to fly into the country for Technical Stops and for connections to cities around the world and has had a multiplier effect on the economy and greatly increased activities in the sector and the country at large”.

“Nigeria therefore needs to take a bold economic step to jumpstart aviation in order to make aviation the fourth contributor to the GDP, create jobs and make Nigeria the hub for Africa,” Capt. Meggison stressed.

The AON chairman observed that road transportation, marine and rail transport do not pay VAT while Domestic Air Transport pays also stressing that even foreign airlines do not pay VAT both in Nigeria and in their home country.

Responding, chairman, FIRS Dr. Babatunde Fowler while expressing understanding for the many challenges and multiple charges airlines are faced with, admonished the AON to engage the Presidency through the Department on The Ease of Doing Business, the Senate and the Minister of Finance to dialogue on how the laws could be amended so that airlines can be at par with their competitors.

As a way of giving domestic airlines a soft landing, Dr. Fowler proposed that because of the payment structure FIRS would give airlines a concession of two months after the billing period to make their VAT remittances so that collections done now are swept during the upper month instead of the following month so as to give room for reconciliation and for airlines to recoup their credit sales.

“Even with the AutoCollect, we can programme it at 50% so that way we don’t expect everything to be swept off at once,”Fowler added.

Dr. Babatunde Fowler said: “We agree that the airline industry is challenged. Government is not out to make profit but to make life more comfortable for the people. Exemptions on tax issues are beyond FIRS as they 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.”

The IATA Area Manager, South West Africa, Dr. Samson Fatokun who was also part of the delegation to the FIRS office said 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.

He therefore 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% of tickets sold are sold by travel agents and that airlines don’t get the money until two weeks later via the BSP or 45 days later due to the issue of credit offered to the Agents.

Hence, it will not be fair if the proposed automation of airline VAT remittance is being charged realtime immediately after sales for money that airlines are yet to receive. He therefore called on FIRS to look at the bigger picture on the long term and consider how to help sustain the aviation sector.

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