AON directs members to stop remitting VAT to FG

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*L-R: Chairman, Airline Operators of Nigeria (AON), Capt. Nogie Meggison; executive director, Overland Airways, Mrs. Aduke Atiba, Mr. Francis Anwana and the executive director, First Nation Airways, Capt. Chimara Imediegwe, during the media briefing.

Alleges FG’s favouritism towards AMCON-run airlines

The Airline Operators of Nigeria (AON) has directed its members not to remit value added tax (VAT) to the government or charge same to tickets as from June 14, 2018.

Speaking at a media briefing in Lagos after a plenary session of the operating airlines, the chairman of AON, Capt. Nogie Meggison said VAT is skewed towards airlines that are not managed by the Asset Management Corporation of Nigeria (AMCON).

Besides, he said VAT is no longer sustainable and suitable for the passengers adding that “our direct competitors, road transport operators are not paying tax.”

“By June 14, 2018, we will stop remitting VAT or adding VAT to ticket fare. VAT is an aberration because there is nowhere else that you find VAT charged to airline ticket. If we had a national carrier, will it be paying VAT?

“AMCON-managed airlines are not paying VAT and as such they can afford to drop fares. AMCON is a warehouse for bad debts; it is not a management company to run airline,” he said.

Continuing, Meggison said: “Nigerian domestic airline travel is the only mode of transportation that is subjected to the VAT. This imposition creates a suppression of domestic airline travel demand therefore resulting in airlines not being able to optimally utilize their aircraft assets and more importantly creating a market distortion.

“The AON’s position is that the VAT on airline ticket sales for domestic carriers must be removed completely forthwith as road transportation, rail, marine and international air travel carriers are not subjected to VAT.

“Moreover, a situation whereby some airlines are paying VAT while some other privileged airlines are not paying VAT and the VAT which we pay is being used to subsidize our competitors against those that are making payment is unfair.”

On the 5 per cent ticket sales charge/charter sales charge, Meggison said AON had always contended that the imposition of a percentage tax model creates a distortion in the industry.

“We have recommended and continue to recommend that the unit tax model preferred and practised by over 90 per cent of countries globally and as recommended by International Air Transport Association (IATA) be adopted immediately.

“It is worthy of note that all the industry agencies including the NCAA Regulator are established as not-for-profit organizations, essentially designed for Cost Recovery.

“Unfortunately, over the years successive governments have encouraged the sourcing and increase in internally generated revenues by these Agencies thereby completely negating the primary purpose for which they have been established.

On zero duty waivers on the importation of commercial aircraft spares and engines since 2018, AON said the airlines are yet to fully benefit from provision.

“This has resulted in airlines having some of their aircraft fleet grounded for days in some cases, thereby resulting in cancelled flights which in event results in chaos at our airports to the displeasure of our esteemed customers. This situation is unacceptable and should be reversed forthwith.

“The federal government should immediately institute the necessary mechanisms to ensure that the customs duty waiver to commercial airline operators as proposed and agreed should be fully effected.

“This in turn, has resulted in serious wastage of scarce fiscal resources within some of these Agencies to the detriment of the travelling population.

“On this basis, the AON strongly recommends that the federal government put in place the necessary mechanisms to reverse the percentile tax model and adopt the global best practice of the Unit tax model, while taking due cognizance of inflation,” said Meggison.

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