A current budget size of ₦10.8 trillion and ₦16.39 trillion for 2022 only spells aggressive revenue generation from agencies of government but sectors at the receiving end are already feeling the brunt even though they are supposed to enjoy some sort of tax waivers and incentives.
One such sector is the aviation industry under the aegis of Airline Operators of Nigeria, they complain of paying Value Added Tax to the Nigerian Customs Service, NCS even though it has been waived off by the Finance Act of 2020.
This development is coming few months after the implementation of a Zero VAT on commercial aircraft and spare parts. The report has it that according to information by operators in the sector, they don’t only pay VAT, they are also subject to other sundry charges.
Taxmobile.Online gathered from the Guardian Newspaper that the NCS had gone further to implement more taxes that have made these levies more expensive than usual.
How this collection happens
As deduced from the report, the implementation of no VAT for the aviation sector has taken a partial shape in the sense that to enjoy free VAT, one has to notify the Customs in advance and obtain the newly introduced Import Duty Exemption Certificate (IDEC).
Why this procedure is telling on the operators is that they have to obtain the IDEC before importation and in the case of emergency, they are left at the mercy of paying VAT and other charges.
A statement from an anonymous operator as deduced from the report has it thus:
“As it is, you cannot need a spare part, import it immediately and not pay VAT. No! Customs has introduced the Import Duty Exemption Certificate (IDEC) process that requires you to apply for exemption and get approval before importation.
“Unfortunately, it doesn’t work that way in aviation. It means an aircraft will have to be grounded for two to three weeks because of a spare part of less than $100. To avoid the loss, I have to order my spare parts, pay their VAT, and move on. That is how complicated the matter is in Nigeria. As an operator, everything is skewed against. It is just so unfortunate,” he said.
Benedict Adeyileka, former Director-General of the Nigeria Civil Aviation Authority (NCAA) had also confirmed the development, emphasizing that this move is counterproductive to the sector’s chase of meeting up with global best practices.
It is also alleged that without IDEC, Customs go-ahead to charge VAT on the current market price of a sold item, without considering it was bought cheaper by the airline in question.
Before you go
- Recall that earlier this year, in a bid to ensure the growth of local operators in the aviation sector, reduce travel costs for passengers, and improve the profitability of airlines, the Federal Government by provisions of the Finance Act 2020 waived off 7.5% VAT on the importation of airlines and spare parts.
- Airline Operators of Nigeria (AON) had in June 2021 applauded the removal of mandatory charges that airlines had erstwhile paid, following the intervention of the National Assembly.
- Exempting the aviation sector from VAT payment has been a hard-fought battle, dating back to 2016.
- The analysis also has it that the Ministry of Aviation in its efforts has rallied against the charges as part of measures to support the local airlines but the Ministry of Finance and NCS have continued to impose charges on operators.