The Federal Government has suspended the deduction of 7.5 per cent Value Added Tax (VAT) on airfares and other air transport services with effect from January 1, 2021, as contained in the 2020 Finance Act recently signed by President Muhammadu Buhari.
A tweet by a member of the bill drafting committee, Taiwo Oyedele, on Wednesday, January 6, confirmed the suspension which is coming three years after a similar suspension.
The Buhari-led administration had, in June 2018, issued an executive order on the suspension of VAT in air transport, with the Federal Inland Revenue Service (FIRS) claiming to be unaware of such a directive, hence it was never implemented.
Airline operators had complained that Nigeria is the only country that still charges VAT on air transport services.
The VAT plus 36 other charges, according to the airlines, account for at least 40 per cent of total revenue and N10 billion in taxes yearly, leaving the airlines heavily indebted and in financial distress or both in most cases.
Chief Executive Officer (CEO) of Med-View Airlines Plc, Muneer Bankole, said he heard of the then removal but that it was never implemented.
“Since we heard about it, we have started talking to FIRS, but they are still chasing us to pay VAT,” Bankole said.
He added that though the removal is a good intention by the government, nothing has really changed to realign Nigerian aviation with global best practices.
“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.
“The 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 per cent to this, four per cent to that, three per cent to another, and so on, then you are still in the colonial era,” Bankole said.
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