VAT: Airlines count losses over Customs implementation delay

Louis Ibah

Nigerian airlines have expressed their misgivings over  Nigerian Customs Service (NCS) delay to implement President Muhammadu Buhari’s Executive Order on the removal of Value Added Tax (VAT) from all forms of shared transportation taxes paid by local operating in the country.

This comes as the Minister of State for Aviation, Mr. Hadi Sirika, announced that the local airline industry recorded a 30 per cent growth in passenger patronage in 2018.

Sirika, who was speaking at an aviation stakeholders forum in Lagos at the weekend said passenger patronage grew in the last one year from 15 million to 18 million with the Lagos and Abuja airports gradually emerging as hubs in the West African sub-region.

“More people are now flying in Nigeria and the country has recorded an average growth of 30 per cent on the domestic route,” Sirika said.

However, the Secretary to the Airlines Operators of Nigeria (AON), Mr. Iroro Ewos, speaking at the same event, said growth would have appreciated if Customs and the Federal Inland Revenue Services (FIRS), had executed a  government directive to abolish VAT payment by local airlines to free up more funds for investments in more aircraft acquisition and routes expansion within and outside the country. 

Ewos said VAT payment continues to add to an already bloated overhead for airlines stifling the ability to make returns on investment even as he expressed the optimism that its removal will see cost of air tickets crashed with more passengers flying on domestic routes. 

“Airline owners are concerned that despite the Executive Order, which was given about a year ago, airlines are still required to pay VAT due to the insistence of FIRS that they work with the law and they are yet to see a government white paper to that effect before they can suspend the collection of VAT from air transportation,” said Ewos.

“We are optimistic that VAT abolition will encourage more people to travel as this would impact positively in the reduction of air fares and this will in turn promote increased air transport activity in the country and encourage greater contribution to the GDP,” added Ewos.

According to him, “only investors in the air transportation sector pay VAT in Nigeria today as all other forms of shared transportation do not pay VAT including marine, road and rail transporters.

“Our prayer is for the minister to please use his office to fast track the issuance of a white paper so that the removal of VAT will be a law and air travel volume can be encouraged just like Ghana did and we can all see the results today in that country,” he added.