Airfares may crash as Buhari abolishes VAT payment by local airlines

Investors in Nigeria’s domestic airline industry yesterday got a major reprieve as President Muhammadu Buhari issued an Executive Order for the removal of Value Added Tax (VAT) from “All Forms of Shared Transportation”, including air travels. Domestic airline owners had halted further payments of VAT on their services to the Federal Government from June 14, 2018 as part of measures to compel it to abolish all existing dichotomy in tax regimes between foreign and local airlines operating in the country. Chairman of the Airline Operators of Nigeria (AON), Capt Nogie Meggison, told aviation correspondents on Wednesday that news of the VAT abolition was received with a lot of excitement by local airline owners. “The AON would like to thank President Buhari and his administration for coming to the aid of domestic airlines with the recent Executive Order to remove VAT from all forms of Shared Transportation,” Meggison said. “We 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 disposable funds and have reached their elastic point in this difficult time of the nation’s economy. “It is our prayer that the President will go a step further to encourage the National Assembly to pass this Executive Order into law as quickly as possible,” Meggison added. He said VAT on commercial air transportation is a huge departure from what obtains worldwide and an increased burden on Nigerian travellers. “Ghana, Benin Republic, Togo and Cote d’Ivoire located next door to us have all abolished VAT on air transportation,” Meggison said. “The recent decision to remove VAT from domestic air transportation will go a long way in bringing succour to groaning Nigerian travellers wishing to enjoy cheaper fares and help grow demand for domestic air travels. This will also lead to 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. “There have been these adverse effects of VAT in the sector as it kept reducing the number of those who can afford to travel by air due to high fares charged by airlines in this tough economic time. Airlines have always pass the tax burden to passengers. This has been seen to be true, according to a recent report from the Federal Airports Authority of Nigeria (FAAN) that passenger traffic dropped by 27 per cent in 2017 and by another 7 per cent in the first quarter of 2018 making it a total of 34 per cent drop in passenger traffic within a span of one year.”]]>

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