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Confusion over continued deductions of VAT upon waivers by FG on airlines

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Months after the federal government, through the Ministry of Transportation had announced the relaxation of five per cent Value Added Tax (VAT) for airline operators, investigations have shown that the tax is still collected by the Federal Inland Revenue Service (FIRS).
Otherwise, four months after issuing an Executive Order for the removal of VAT from air transportation, the Federal Government has failed to implement the directive.
The Federal Government had on June 6 announced the immediate end to the deduction of five per cent VAT from all forms of shared transportation in Nigeria.
However, VAT is charged as five per cent on every flight ticket sold by airlines and is remitted to the Federal Government.
Even though while speaking at the inauguration of the Port Harcourt international airport last weekend, President Muhammadu Buhari, described the decision to remove VAT from domestic air transportation as being in line with global best practices, the deduction has continued even till yesterday, Monday, October 29, 2018.
Business Hilights recalls that prior to the removal, the leadership of Airline Operators of Nigeria (AON), had regularly queried the rationale in collecting the tax when it is not being collected from operators in other modes of transportation in Nigeria and gave June 14, 2018 date as the day their members will halt the payment before the government hurriedly announced on June 6 for the cessation.
The body in a statement in June averred that “The AON’s position is that 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.
“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. 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.”
In an interview, the Chief Operating Officer, Dana Air, Mr Obi Mbanuzuo, had decried that “If Dana flies internationally, it will not be charged VAT; but when it does domestic, it is charged VAT at five per cent.
“If VAT was removed, which we are currently fighting for with the minister, it will allow tickets to be cheaper,” Mbanuzuo noted
Government is yet to give any reason for the continued deduction even after it has informed operators of the suspension of VAT payments by AON.

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