The Presidential Fiscal Policy And Tax Reforms Committee says the new tax laws will help, not hurt airlines operations in Nigeria.
The committee’s position was in response to claim by the Chairman of Air Peace, Allen Onyema that the new tax laws will have negative impacts on air line operations in the country.
Onyema had warned that the new tax laws would drive massive fare hikes and force airlines out of business.
However, the committee, said it is fully aware of challenges facing the aviation industry in Nigeria, particularly the burden of multiple taxes, levies, and regulatory charges.
It insisted that the new tax laws is part of the solution,not the source of the problem.
“Claims not grounded in fact do not help this process.
“Several long-standing tax issues driving costs in the sector have been resolved in the new tax laws or are being structurally addressed,” the committee headed by Mr Taiwo Oladele said.
The statement reads : ”
𝐓𝐇𝐄 𝐍𝐄𝐖 𝐓𝐀𝐗 𝐋𝐀𝐖𝐒 𝐖𝐈𝐋𝐋 𝐇𝐄𝐋𝐏, 𝐍𝐎𝐓 𝐇𝐔𝐑𝐓 𝐀𝐈𝐑𝐋𝐈𝐍𝐄𝐒
We recognise the genuine challenges facing Nigeria’s aviation industry, particularly the burden of multiple taxes, levies, and regulatory charges.
The Presidential Fiscal Policy and Tax Reforms Committee on behalf of the government has engaged extensively with airline operators and those engagements are ongoing.
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.
Several long-standing tax issues driving costs in the sector have been resolved in the new tax laws or are being structurally addressed including:
1. 𝐖𝐢𝐭𝐡𝐡𝐨𝐥𝐝𝐢𝐧𝐠 𝐓𝐚𝐱 𝐨𝐧 𝐀𝐢𝐫𝐜𝐫𝐚𝐟𝐭 𝐋𝐞𝐚𝐬𝐞𝐬
The single biggest tax burden on airlines has been the 10 percent withholding tax (WHT) on aircraft leases under the existing law.
“This has now been removed and replaced with a rate to be determined in a regulation, creating the legal basis for either a full exemption or a significantly lower rate.
To put this in context, on a $50 million aircraft lease, an airline currently pays $5 million in WHT, which is non-recoverable and therefore directly increases operating costs and strains cash flow.
Eliminating this burden is a major structural relief for the sector.
2. 𝐕𝐀𝐓 – 𝐅𝐫𝐨𝐦 𝐇𝐢𝐝𝐝𝐞𝐧 𝐂𝐨𝐬𝐭 𝐭𝐨 𝐓𝐫𝐮𝐞 𝐍𝐞𝐮𝐭𝐫𝐚𝐥𝐢𝐭𝐲
While the temporary VAT suspension introduced in 2020 following COVID-19 was attractive, it came with a hidden cost.
Airlines could not recover input VAT on non-exempt items including certain assets, consumables, and overheads, meaning VAT became embedded in costs.
Under the new tax laws, airlines become fully VAT-neutral.
Any VAT paid on imported or locally procured assets, consumables, and services will become fully claimable.
Where an airline has excess input VAT, the law mandates a refund within 30 days, supported by a fully funded tax refund account and the option to offset VAT credits against other tax liabilities.
This directly reduces cost pressure and improves liquidity.
3. 𝐈𝐦𝐩𝐨𝐫𝐭 𝐃𝐮𝐭𝐢𝐞𝐬
Existing exemptions on commercial aircraft, engines, and spare parts remain fully in place.
There is no reversal or new burden introduced under the tax reforms.
4. 𝐈𝐦𝐩𝐚𝐜𝐭 𝐨𝐧 𝐓𝐢𝐜𝐤𝐞𝐭 𝐏𝐫𝐢𝐜𝐞𝐬
Airline operations are inherently low-margin. A 7.5 percent VAT on tickets, within a system where input VAT is fully recoverable, results in a significantly lower net impact than the headline rate suggests.
Even in a worst-case scenario where VAT were not claimable, the maximum impact would still be 7.5 percent, not the price increases being suggested.
That is, a N125,000 ticket becomes not more than N134,375 and a N350,000 ticket not more than N376,250.
5. 𝐂𝐨𝐫𝐩𝐨𝐫𝐚𝐭𝐞 𝐈𝐧𝐜𝐨𝐦𝐞 𝐓𝐚𝐱 (𝐂𝐈𝐓)
The new law provides a framework to reduce corporate income tax from 30 percent to 25 percent which will benefit airlines.
In addition, several earmarked profit-based levies including Tertiary Education Tax, NASENI, NITDA and Police levies have been harmonised into a single Development levy, reducing complexity and ensuring certainty.
6. 𝐌𝐮𝐥𝐭𝐢𝐩𝐥𝐞 𝐋𝐞𝐯𝐢𝐞𝐬 𝐚𝐧𝐝 𝐂𝐡𝐚𝐫𝐠𝐞𝐬
The multiplicity of levies imposed on airlines and flight tickets is real, but these charges are not created by the new tax laws.
It is therefore incorrect to attribute them to the reform.
The government is actively working with operators and relevant agencies to achieve a lasting solution. Importantly, the tax harmonisation provisions in the new laws mean the situation can only improve, not worsen, from 2026.
𝐂𝐨𝐧𝐜𝐥𝐮𝐬𝐢𝐨𝐧
Overall, the new tax laws provide a strong legal and policy framework to resolve the long-standing tax challenges in the aviation sector, reduce operating costs for airlines, and ensure minimal impact on passengers.
If the current engagement with industry stakeholders is sustained, the remaining non-tax issues will be resolved sooner rather than later.
Claims not grounded in fact do not help this process. The new tax laws are not the problem, they are a critical part of the solution.
– 𝑷𝒓𝒆𝒔𝒊𝒅𝒆𝒏𝒕𝒊𝒂𝒍 𝑭𝒊𝒔𝒄𝒂𝒍 𝑷𝒐𝒍𝒊𝒄𝒚 𝒂𝒏𝒅 𝑻𝒂𝒙 𝑹𝒆𝒇𝒐𝒓𝒎𝒔 𝑪𝒐𝒎𝒎𝒊𝒕𝒕𝒆𝒆.
(vitalnewsngr.com)
