By Ayoola Olaitan
Aviation expert and Chief Executive Officer of TopBrass Limited, Mr. Roland Iyayi, said that the removal of the deduction of 7.5 percent Value Added Tax (VAT) on airfares and other air transport services will have no effect on airfares.
Despite the latest suspension order for VAT which was contained in the 2020 Financial Act signed into law by President Muhammadu Buhari, and already effective since January 1, 2021, the airline operator says it would have no effect on airfares.
According to Iyayi, “VAT has been removed from airline ticket sales, so as at today nobody should be charging anybody for it. However, these are not things that users can see directly because such changes occur only at the airline end. I’m not sure, given what the airlines have to pay that this will translate to anything that the consumers or the passengers can see directly in terms of airfares”.
Recall that in 2018, government had suspended five percent charges on imported commercial aircraft and spare parts by issuing an executive order but the Federal Inland Revenue Service (FIRS) claimed to be unaware of such a directive, hence, it was never implemented leaving airlines confused on the pronouncement.
One of the major agitations of airlines is the non- implementation of this directive after it was first made public as they insisted that VAT among other charges on airlines accounted for the high cost of air fares.
However, Iyayi, who is also a former Director General of Nigerian Airspace Management Authority (NAMA), posited that airlines have not been able to get value for ticket sales because of the constant devaluation of the naira.
Speaking with our correspondent, he argued that “if a ticket is sold at N30,000 in the past, they won’t say because they removed VAT it will reduce. There are chances that it might even increase because airlines have not been able to get value for the ticket sales and the cost of devaluation of the naira is very difficult for airlines to recover”
Iyayi also noted that government need to address issue on strengthen the naira to help give value to the market and warned against using reserves to prop up the market.
“You can’t strengthen the naira by saying you want to use your reserve to prop it up in the market all the time, no. If you are using your reserves it means you are creating more problems for the future. Ideally, to strengthen the currency is to manufacture. Most of the things we consume, if we had produced them there won’t be need to spend money bringing them in. So that’s the first step in strengthen the currency”
“Unfortunately, that’s not happening simply because Nigeria is a consumer state. So, we will continue to be expose to the vagaries of the foreign exchange fluctuation. And you know, that will still be there for some foreseeable future, until things reverse, maybe we focus on agriculture” he noted.