Chairman of the Presidential Fiscal Coverage and Tax Reforms Committee, Taiwo Oyedele, has countered claims that Nigeria’s newly enacted tax legal guidelines would negatively affect the aviation trade, stating that the reforms are supposed to cut back—reasonably than deepen—the monetary pressures going through airline operators.
In a press release issued on behalf of the Federal Authorities, the Committee acknowledged the long-standing challenges confronting the aviation sector, notably the difficulty of a number of taxes, levies, and regulatory costs. It disclosed that it has held intensive engagements with airline operators and different trade stakeholders, including that consultations stay ongoing.
Based on the Committee, opposite to issues expressed in some quarters, the brand new tax legal guidelines kind a central a part of the answer to the trade’s difficulties, as a number of historic price drivers have both been eradicated or at the moment are being addressed by way of structural reforms.
On the difficulty of withholding tax on plane leases, the Committee recognized the previous 10 per cent price as probably the most important tax burden on airways. Below the brand new tax framework, the withholding tax has been eliminated and changed with a price to be decided by regulation, permitting room for both full exemption or a considerably diminished price.
It defined that below the earlier system, an airline leasing a $50 million plane paid as a lot as $5 million in non-recoverable withholding tax, a price that immediately strained operations and money circulate.
Clarifying the modifications to Worth Added Tax, the Committee defined that though the short-term VAT suspension launched after COVID-19 appeared useful, it resulted in hidden prices as a result of airways couldn’t get well enter VAT on sure belongings, consumables, and overheads.
Below the brand new legal guidelines, airways shall be absolutely VAT-neutral, with all enter VAT on imported or regionally sourced items and providers absolutely claimable. The framework additionally mandates VAT refunds inside 30 days by way of a completely funded tax refund account or permits credit to be offset in opposition to different tax liabilities.
On import duties, the Committee assured airline operators that current exemptions on business plane, engines, and spare components stay unchanged, stressing that no extra burden has been launched below the reforms.
Addressing issues over potential will increase in ticket costs, the Committee famous that airline operations usually function on skinny margins and {that a} 7.5 per cent VAT on tickets—inside a system the place enter VAT is absolutely recoverable—would have a a lot decrease internet affect than feared.
It defined that even in a worst-case situation the place VAT will not be claimable, the utmost improve would nonetheless be capped at 7.5 per cent. This might imply a ₦125,000 ticket would rise to about ₦134,375, whereas a ₦350,000 ticket would improve to roughly ₦376,250.
On company earnings tax, the Committee disclosed that the brand new legislation offers a framework for lowering the speed from 30 per cent to 25 per cent, a improvement anticipated to profit airline operators.
It additionally famous that a number of profit-based levies together with the Tertiary Schooling Tax, NASENI, NITDA, and Police levies—have been harmonised right into a single Improvement Levy, thereby lowering complexity and enhancing predictability.
Whereas acknowledging the long-standing drawback of a number of levies and costs imposed on airways and tickets, the Committee pressured that these points weren’t created by the brand new tax legal guidelines. It added that the federal government is actively partaking airline operators and related companies to develop lasting options, noting that tax harmonisation provisions within the new framework imply situations can solely enhance from 2026.
In conclusion, the Committee acknowledged that the brand new tax legal guidelines present a powerful authorized and coverage basis to resolve the aviation sector’s tax challenges, decrease working prices for airways, and minimise the burden on passengers.
It expressed confidence that continued engagement with stakeholders would assist resolve excellent non-tax points, cautioning that claims not grounded in reality do little to advance the reform course of.
“The brand new tax legal guidelines aren’t the issue,” the Committee mentioned. “They’re a important a part of the answer.”
