Finance Act: Key players react to removal of VAT from commercial airline tickets

The Federal Government has finally yielded to one of the several yearnings of the domestic airlines for the removal of Value Added Tax (VAT) on air transport operations as contained in the 20 changes just introduced in the Finance Act 2020.

The VAT removal which was signed by President Muhammadu Buhari, and already taken effect January 1, 2021 which included exemption of commercial airline tickets from VAT, has brought great relief to Nigeria’s airline operators who had hitherto lamented the negative impact of many VAT charges on their cost of operations.

Reacting to the development, the managing director of Afrijet Airlines, Alhaji Mohammed Tukur, thanked the government of Buhari for granting this long time request.

Going down the memory lane, Tukur cited how the domestic airlines right from the administrations of former Presidents Olusegun Obasanjo, Late Umaru Musa Yar’Adua had clamoured for the removal of many unfavourable taxes hampering the progress of the local airlines.

According to him, prior to now, other modes of transport like railway and maritime had been exempted from paying unnecessary taxes.

While expressing joy over the removal of VAT from commercial airlines tickets, Tukur appealed that similar action should be taken on other taxes with particular emphasis on the need for government to exempt incoming airlines from paying taxes in the first six months of their operations.

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In his reaction, the managing director of Centurion Aviation Security and a member of Aviation Round Table, Group Captain John Ojikutu, retired, declared: “Exemption of VAT has been long overdue but not the tickets sales charge (TSC). VAT is the responsibility of the passenger, not the airlines while TSC is that of the airlines.

“While the former is 7.5 per cent the latter is 5 per cent; so who should benefit, the passengers or the airlines? What is the value of VAT as against the landing and parking charges and the aeronautical charges that most airlines hardly pay? I have suggested that the landing and parking charges on services at airports be reviewed according to the category grading of the airport.

“I suggested grading the airports into four, A to D. While Cat A would have the highest charge, Cat D would be the lowest. These are what the airlines should contest not VAT on tickets. A passenger who pays for economy class instead of business or first class pays less VAT and saves himself some monies, not the airlines. There is still the cost of fuel for the airlines to contend with.”

Other key players who reacted to the VAT removal have commended the government even as they alerted air travellers to the development saying: “Next time you fly, cross-check that you are not wrongly charged VAT. Hopefully, airfares should come down.”

In a circular cited by Tribune Online late Wednesday night, the airline and air transport VAT removal which was number 14 on the list of the Finance Act 2020 release specifically emphasised the exemption of commercial airline ticket from VAT, and hire or lease of agricultural equipment for agricultural purposes.

NIGERIAN TRIBUNE