The new tax laws will help, not hurt airlines -Taiwo

Chairman, Presidential Fiscal Policy and Tax Reforms Committee, Taiwo Oyedele, has dismissed claims that Nigeria’s new tax laws will hurt the aviation industry, insisting that the reforms are designed to ease, rather than worsen, the long-standing financial challenges facing airline operators.

In a statement issued on behalf of the Federal Government, the Committee acknowledged the genuine difficulties confronting the aviation sector, particularly the burden of multiple taxes, levies and regulatory charges. It disclosed that it has engaged extensively with airline operators and other industry stakeholders, noting that consultations are ongoing.

According to the Committee, contrary to concerns raised in some quarters, the new tax laws form a critical part of the solution to the industry’s problems, as several long-standing cost drivers have either been resolved or are being structurally addressed.

On withholding tax on aircraft leases, the Committee described the existing 10 per cent rate as the single biggest tax burden on airlines. Under the new tax framework, the withholding tax has been removed and replaced with a rate to be determined by regulation, creating room for either full exemption or a significantly lower rate. It noted that under the old system, an airline leasing a $50 million aircraft paid as much as $5 million in non-recoverable withholding tax, a cost that directly strained cash flow and operations.

The Committee also clarified changes to Value Added Tax (VAT), explaining that while the temporary VAT suspension introduced after COVID-19 appeared attractive, it created hidden costs because airlines could not recover input VAT on certain assets, consumables and overheads. Under the new laws, airlines will become fully VAT-neutral, with all input VAT on imported or locally sourced goods and services fully claimable. The law also mandates VAT refunds within 30 days, supported by a fully funded tax refund account, or allows credits to be offset against other tax liabilities.

On import duties, the Committee assured operators that existing exemptions on commercial aircraft, engines and spare parts remain intact, stressing that no new burden has been introduced by the reforms.

Addressing fears of higher ticket prices, the Committee noted that airline operations are typically low-margin and that a 7.5 per cent VAT on tickets, within a system where input VAT is fully recoverable, would have a significantly lower net impact than suggested. It explained that even in a worst-case scenario where VAT is not claimable, the maximum increase would still be limited to 7.5 per cent, meaning a ₦125,000 ticket would rise to about ₦134,375, while a ₦350,000 ticket would increase to approximately ₦376,250.

On corporate income tax, the Committee revealed that the new law provides a framework for reducing the rate from 30 per cent to 25 per cent, a move expected to benefit airlines. In addition, several profit-based levies, including the Tertiary Education Tax, NASENI, NITDA and Police levies, have been harmonised into a single Development Levy, reducing complexity and improving certainty.

The Committee acknowledged the long-standing issue of multiple levies and charges imposed on airlines and tickets but stressed that these were not created by the new tax laws. It noted that government is actively engaging operators and relevant agencies to find lasting solutions, adding that tax harmonisation provisions in the new framework mean the situation can only improve from 2026.

In conclusion, the Committee stated that the new tax laws provide a strong legal and policy foundation to address the aviation sector’s tax challenges, reduce operating costs for airlines and minimise the impact on passengers.

It expressed confidence that sustained engagement with industry stakeholders would help resolve remaining non-tax issues, warning that claims not grounded in fact do not aid the reform process.

“The new tax laws are not the problem,” the Committee said. “They are a critical part of the solution.”

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