Business Hilights
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Why AON plans to stop paying VAT from June 14, rejects planned national carrier

More facts have emerged on why the leadership of the Airline Operators of Nigeria (AON) has fixed June 14, 2018 as the day it will cease from making remittances for Value Added Tax (VAT).

AON is the umbrella body of all private airlines in the country.

This is the group had viewed the hurried plans of the federal government to float a national carrier as counterproductive and against the interest of private entrepreneurs.

The leadership argued that “The AON is at a loss as to the relevance and need of a national carrier at this point in time in the history of the nation. While we are not averse to the government providing a conducive operating business environment and a level playing field for the establishment of a private sector driven flag carrier, the idea of using taxpayers’ money to float a ‘national carrier’ in 2018 is not only counterproductive, but inimical to the overall interests of the present crop of private entrepreneurs.

The group based the planned end to paying VAT on the fact that other modes of transportation do not pay the tax, describing the continued remittances as unfair to their members.

AON further lamented that domestic airline travel was the only mode of transportation that was subjected to the payment of VAT, adding that its imposition was creating a suppression of domestic airline travel demand, resulting in the carriers not being able to optimally utilise their aircraft assets and more importantly, creating a market distortion.

Business Hilights gathered that the decision was taken after deliberations by the chief executive officers of airlines in the country and issued a statement saying “The AON has resolved that effective June 14, 2018, its members shall cease to make VAT remittances as doing so is unfair, as some airlines are paying, while some other airlines are not paying domestic VAT charges.

“Also, Nigerian domestic airline travel is the only mode of transportation paying VAT in the country today as road, rail, marine and international airlines do not pay”.

Continuing, they added that “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 subsidise our competitors against those that are making payment is unfair.”

Explaining more their rejection of emerging national carrier at a time private operators are facing issues in funding, AON argued that “In the overall scheme of things, the ‘national carrier’ can only result in a huge distortion to the current market and will be a huge drainpipe to the government’s treasury.

“In this regard, therefore, we urge the Federal Government to provide clarity on the agenda, whether it’s for job creation or for profit, as well as steps being taken in the establishment of this ‘national carrier’, especially when viewed against the background that the Minister of State Aviation has indicated that this airline will commence operations on December 24, 2018.”

The key reason of the AON in rejecting the national carrier stemmed from the fact that the business model was no longer practicable worldwide as it was in the 1970s, adding that 80 per cent of the airlines in Europe were government-owned airlines, and 98 per cent had been privatised.

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