The Airline Operators of Nigeria (AON) has commended President Muhammed Buhari and the Federal Government of Nigeria for listening to the cries of domestic airlines in the country by issuing an Executive Order for the removal of Value Added Tax (VAT) from “All Forms of Shared Transportation”, which we believe includes Air Transport.
We believe the decision by the Government following the Federal Executive Council (FEC) Meeting of June 6, 2018 presents a veritable opportunity for the aviation industry to immediately take advantage of the decision to expedite a White Paper to that effect, says AON.
AON Chairman, Capt. Nogie Meggison says: “We as Nigeria have been crying out for decades now for discussions on the immediate removal of VAT from domestic air transportation in line with global best practice, but we have barely been heard over the years. 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% in 2017 and by another 7% in the first quarter of 2018 making it a total of 34% drop in passenger traffic within a span of one year,” he adds.
Furthermore, he notes that domestic Air transportation in Nigeria is the only mode of commercial transportation that pays VAT. Road, rail, marine and foreign airlines operating in Nigeria don’t pay VAT in their home country or in Nigeria with reference to an information circular by the Federal Inland Revenue Service (FIRS) which grants them VAT exemption (Information No.: 9701; Circular Dated 1st Jan. 1997); Part L (b) No. 8.
VAT on commercial air transportation is a huge departure from what obtains worldwide and an increased burden on the Nigerian travellers. Ghana, Benin Republic, Togo and Cote d’Ivoire located next door to us have all abolished VAT for air transportation.
The recent decision by the Federal Government to remove VAT from Domestic Air Transportation will go a long way to bring succor to groaning Nigerian travelers to be able to afford to travel by air and the growth in demand for domestic air travel will lead to the creation of jobs by the whole air transport service chain (airlines, airports, ground handlers and catering companies) as well as increase revenues for government.
This is a step that Ghana took over a year ago and the benefits are there for all to see today as Accra is fast becoming the Aviation Hub for West Africa.
AON would therefore like to use this medium to once again thank President Muhammed Buhari and his administration for coming to the aid of domestic airlines by the recent Executive Order to remove VAT from all forms of shared transportation.
It is our prayer that the President will go a step further to encourage the House of Assembly to pass this Executive Order into law as quickly as possible.
This will go a long way to encourage more Nigerians to fly and put the airlines on a positive footing to grow the economy and contribute to the GDP. It will also encourage increased direct and indirect services that will create more jobs for our Nigerian youths thereby crowning the efforts of the President Muhammed Buhari government that has shown a lot of faith in the Nigerian domestic aviation sector with the giant strides aimed at ameliorating the challenges of the sector including the implementation of Duty Waiver on the importation of aircraft, aircraft engines and spare parts.
“We therefore thank President Muhammadu Buhari for his visionary leadership and fatherly understanding of the challenges being faced by domestic airlines by announcing the recent Executive Order on Removal of VAT which will turn around the airlines to be able to grow the economy and contribute positively to the GDP and create more jobs for our Nigerian youths”, Capt. Nogie Meggison submits.
Source: AON