For several years, Nigerian airlines expressed dissatisfaction over the payment of Value Added Tax (VAT) and complained that it ate deeply into their operations.
Also, the airlines lamented that they pay too many taxes and charges which continued to eat into their profits.
Nigerian airlines have average of 10 years lifespan as after that, they either go under or they start grappling to survive.
What pained the airlines more was that it is only the air travel in the whole gamut of transport system that pay VAT; others are exempted.
Operators pointed out that what kills airlines includes the charges and taxes, the cost of maintenance of aircraft overseas and cost of insurance. The airlines see the payment of VAT as burrowing a deep hole in their finances because it is a deduction of five per cent of ticket sales, which is a huge amount when put together. This is in addition to another five per cent of ticket sales which is paid to the Nigerian Civil Aviation Authority (NCAA), which it shares with other four agencies.
But in addition to this payment of VAT, there are other charges levelled at the airlines, including that of the Nigerian Airspace Management Agency (NAMA), which takes a percentage of the five percent collected by NCAA but still charges airlines for aeronautical and en-route services. The Federal Airports Authority of Nigeria also level on airlines passenger service charge (PSC) of N1000 per passenger.
But the agencies always argued that some of these charges are built in the tickets, but the airlines insist that these charges increase the cost of ticket and without them the cost of air fares would be less and more people would travel by air.
Certainly, it was a tortuous journey for airlines in the clamour to exempt them from the payment of VAT. Since the Muhammadu Buhari administration started, the airlines have made efforts to convince the federal government to exempt airlines from the payment of VAT.
The Chairman and Chief Executive Officer of Air Peace, Allen Onyema narrated the efforts the airlines made to make sure that this administration listened to their plight, which past administrations did not do.
“The Airline Operators of Nigeria took this matter to the then acting President, the Vice President, Prof. Yemi Osinbajo, and he called for a meeting and we met with him and gave him details of our grouses. And he called for an enlarged meeting of all the agencies and the Ministry of Aviation and the airline operators. We held a second meeting where we presented our issues. Osinbajo set up a committee to look at these issues,” Onyema said.
He noted that he along with other domestic airline operators did not give up. There was a time the airlines met with the Executive Chairman of the Federal Inland Revenue Service (FIRS), Babatunde Fowler and noted that the Minister of State, Aviation, Senator HadiSirika, showed uncommon commitment to see that airlines were exempted from the payment of VAT.
That was why when the exemption of VAT was announced recently, Onyema commended the federal government and noted that it came after many years of clamour and after many regimes were served same request; yet, they did not do anything about it until “when the Muhammadu Buhari administration listened to the yearnings of the airlines and hearkened to their cry.”
“I am very happy about the action taken by the federal government. It shows that this government is a listening government and it also shows that President Buhari wants Nigerian companies to survive. I am sure that everybody in the aviation industry will be jubilating now,” Onyema said.
He noted that the money saved from the exemption would be used by airlines to maintain their fleet, acquire more aircraft and also create jobs, adding that payment of VAT eroded the revenue of airlines and might have contributed to the collapse of many of them in the past.
Onyema remarked that it is gladdening when the business community makes a case and government listens, observing that what the current federal government is doing gives entrepreneurs the motivation to invest in the country.
“The exemption of VAT payment for airlines will save thousands of jobs. Aviation is capital intensive with very meagre return on investment, but it creates jobs. Airlines will recoup money for the proper maintenance of their fleet.
“Increase their capacity and acquisition of more aircraft. President Buhari loves indigenous companies. Every year Nigerian airlines pay several billions of naira as VAT. Nobody listens to airlines all these years until now. But this is a listening President. My colleagues and I are highly encouraged by this decision,” Onyema said.
Onyema also commended the Minister of State, Aviation, Senator Sirika for his tireless efforts to ensure that the desire of the airlines was realised and noted that as an aviator, the Minister knew what the airlines are going through.
