As the January 1 tax reform law implementation deadline draws nearer, players in the aviation sector have expressed doubt about the industry prospects of the new Acts, OLUSEGUN KOIKI reports.

The intentions of the Federal Government with regard to the recently signed new tax Acts are to improve revenue generation, enhance tax administration, ensure harmony, reduce tax burden on struggling businesses and promote transparency and fairness in the fiscal space, among others.

The Acts that were signed in June by President Bola Tinubu are yet to commence implementation. But players in the Nigerian aviation industry, especially the airline sub-sector, are not comfortable with the new law as assented to by the president.

Some of the airline operators said the new Acts, as signed, contravene the recommendations and standards of the International Civil Aviation Organisation (ICAO), which places aviation as a cost recovery and not revenue earning sector.

They also feared that the reforms would lead to the return of the hitherto abolished value-added tax (VAT), payment on customs duties for imported aircraft and spare parts and erase some of the waivers granted to the airlines by the government about five years ago.

Also, the aviation stakeholders are not comfortable with the new revenue reforms, though also not willing to make public statements on the issue because they are government appointees.

However, the Director-General of the Nigerian Safety Investigation Bureau (NSIB), Capt. Alex Badeh Jr., in a recent interaction with a few journalists, echoed the sentiments of his colleagues.

Badeh warned that the new system might be cumbersome and possibly slow down the sector while affecting safety protocols in the long run.

According to him, the aviation industry, especially the agencies, requires funds to consistently train and retrain its technical personnel to stay current and in compliance with the ICAO-recommended standards and practices.

He added: “We are still studying to see how it will affect us. Some say it is going to affect us negatively, but I do believe that there are engagements right now with the government by the Ministry of Aviation and Aerospace Development, and if this is a problem.

“In the transportation sector, safety is key, and we need money to train people. If the government comes out and says they will dole out the money as they dole out to other agencies, it is really going to jeopardise safety. We can’t do our job efficiently and effectively. How do we prevent this loss of lives?

“But being a safety person, I am optimistic that it will be stopped before we get there. There will be an intervention, probably from the minister and other heads of agencies. I believe this would happen before the enforcement.”

Commenting on the issue, President of the Aircraft Owners and Pilots Association of Nigeria (AOPAN), Dr Alex Nwuba, said the government may have attempted to lower the cost of doing business for small organisations, while big companies like airlines would be overburdened with additional taxes.

For the airlines, Nwuba said that any additional taxes would be passed to the passengers, thereby increasing the costs of air tickets and other services.

Nwuba explained that profit margins in the airline sub-sector are always in single digits, which stifle smooth operations for many of the operators.

“The challenge is most services are provided by third parties who think the industry is rich, reporting profits that the airlines can only envy,” he said.

Also, an agent of foreign airline holders in Nigeria, Hassan Ejibunu, said that the implementation of the tax reform laws could raise maintenance and safety cost pressure on the airline operators.

Ejibunu expressed concerns that customs duties and VAT on aircraft, engines and spares could immediately raise operational costs, stressing that this could lead to the airline operators deferring non-critical maintenance, thereby leading to an undesirable safety and reliability outcome.

Ejibunu, who until recently was a Director, Air Transport Management in the Ministry of Aviation and Aerospace Development, said that as a director in the ministry, he and his team had the statutory responsibility of liaising with the Federal Ministry of Finance and the Nigeria Customs Service (NCS) to secure the necessary waivers for the airlines on aircraft and spare parts importation.

He feared that passing a 7.5 per cent VAT to passengers would raise domestic fares, adding that this may lead to reduced load factors.

Besides, he maintained that the new acts may further worsen the “fragile Nigerian aviation sector”, cause massive job losses, and potentially raise social instability.

He said: “If the exemption on VAT and payment of customs duties are now jettisoned with the new tax reforms, it will undoubtedly lead to an increase in the payment of airfare by passengers.

“The airline business is not a ‘Father Christmas’ venture, as the cost would be passed to the passengers. At the moment, passengers are grappling with the burden of paying about N300,000 for a round trip between Abuja and Lagos, and also from Abuja to other destinations like Port Harcourt, Kano and Enugu.”

He added that centralised revenue collection for aviation agencies may complicate how the NCAA is funded from the five per cent ticket/cargo sale charge (T/CSC).

Ejibunu appealed to the Federal Government to align the country’s aviation industry with ICAO norms, retain duty/VAT exemptions for aircraft and safety-critical spares in accordance with ICAO Doc 8632 (Policies on Taxation in the Field of International Air Transport).

He also suggested that the provisions of tax reform laws should be carefully reviewed by tax and economic professionals to identify areas where waivers could be expressly granted to the sector.

He added: “The government should make access to forex for airlines less tedious and cumbersome. This would have a positive impact on the growth and development of airlines in Nigeria.

“If domestic VAT on tickets is retained, it should be phased with fare-cap guardrails for an interim period to avoid price shocks. Pair with public reporting on how aviation tax receipts fund safety infrastructure (radar, nav-aids, runway rehabilitation).”

Also, the Chief Executive Officer (CEO), Capt. Edward Boyo said that one of the subsidiaries of the company, Aviation & Allied Business Publications, in partnership with the Nigeria Revenue Service (RNS), would next

Thursday hold a summit on the issue to deliberate on its implications for the aviation sector.

Boyo explained that there have been different opinions in the industry about the new Act and how it would affect the industry, but said the conference would provide a platform for all players to brainstorm and drive conversations on how the new tax regime would impact businesses in the sector.

Besides, the former Rector of the Nigerian College of Aviation Technology (NCAT), Zaria, Capt. Samuel Caulcrick, said the new tax reform Act was set to spark a dramatic transformation for Nigerian airlines, bringing with it the potential for a vibrant shift in air travel dynamics.

Caulcrick explained that the Act may become the new go-to for adventure seekers and business travellers alike, adding that it also presented an opportunity for positive change for the entire Nigerian aviation industry.