FG Denies Air Peace CEO’s Claim That New Tax Laws will Raise Costs for Airlines
- The Presidential Fiscal Policy and Tax Reforms Committee has said new tax laws will support airlines
- He said the 10% withholding tax on aircraft leases has been removed under the new framework
- Airlines will become VAT-neutral, allowing them to reclaim input VAT and improve cash flow
Oluwatobi Odeyinka is a business editor at Legit.ng, covering energy, the money market, technology and macroeconomic trends in Nigeria.
The Presidential Fiscal Policy and Tax Reforms Committee has said Nigeria’s new tax laws are designed to support airlines, not harm them, as concerns continue over rising operating costs in the aviation sector.
Source: Twitter
In a statement released by the committee, it acknowledged the financial pressures facing domestic airlines, particularly the impact of multiple taxes, levies and regulatory charges.
“Contrary to the claim that the new tax laws will hurt the industry, the reform is part of the solution, not the source of the problem”, the committee said.
Legit.ng reported that Air Peace CEO Allen Onyema predicted an uptrend in airfares as new tax provisions threaten to push local flight fares beyond N1 million and force airlines to suspend operations.
Onyema called for urgent government intervention to prevent sector collapse and limit fare increases.
FG engages airline operators, stakeholders
According to the committee, the Federal Government has been engaging airline operators and other stakeholders, stressing that the new tax framework resolves several long-standing issues that have historically increased operational expenses for airlines.
One of the major changes highlighted is the removal of the 10% withholding tax on aircraft leases under the previous tax regime.
The committee explained that this non-recoverable tax significantly increased airline costs.
Under the new law, the rate will now be set by regulation, opening the door for either a full exemption or a much lower charge, the committee stated.
The committee also addressed Value Added Tax (VAT), noting that while the temporary VAT suspension introduced during the COVID-19 pandemic appeared beneficial, it prevented airlines from reclaiming VAT on several inputs.
Under the new tax laws, airlines will become fully VAT-neutral, allowing them to claim VAT paid on assets, consumables and services.
Excess VAT credits, it added, will be refundable within 30 days or offset against other tax obligations.
On import duties, the committee clarified that existing exemptions on aircraft, engines and spare parts remain unchanged, stressing that no new import-related taxes have been introduced.
Responding to concerns about higher ticket prices, the committee said a 7.5 per cent VAT on tickets, within a system where input VAT is recoverable, would have a limited effect on fares.
It explained that even in a worst-case scenario, the increase would not exceed the VAT rate itself.
The committee further stated that the new tax laws provide a pathway to reduce corporate income tax from 30 per cent to 25 per cent, while also consolidating several profit-based levies into a single development levy to reduce complexity.
While acknowledging the issue of multiple charges imposed by different agencies, the committee emphasised that these levies were not created by the new tax laws.
It added that tax harmonisation measures in the reforms are expected to improve the situation from 2026.
The committee concluded that the new tax laws offer a strong legal framework to address long-standing challenges in the aviation sector, lower airline operating costs and limit the impact on passengers.
Source: Facebook
Airlines give conditions to crash fares as Nigerians lament
Legit.ng earlier reported that Nigerian airlines have given a condition for lower airfares as passengers pay up to N500,000 for a one-way ticket.
The operators explained that the key to more affordable airfares is for Nigeria to adopt a 25% cut in aviation taxes and charges implemented by the Economic Community of West African States.
The Airline Operators of Nigeria also noted that multiple levies, such as the aviation oversight tax, remain a major driver of fares in the country.
Source: Legit.ng
