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VAT: Fears of imminent domestic airfares hike grip aviation sector

Following the recent presidential assent to the Finance Bill which is now law, apparent fears have engulfed operators in the nation’s aviation sector over possible hike in taxes which will translate to higher airfares.

Recall that a new VAT rate of 7.5 per cent will become effective with the signing of the Finance Act by President Muhammadu Buhari from February. It was raised by 2.5 per cent from five per cent previously charged.

Industry pundits and players say travellers and buyers of vehicles should be prepared to pay more for airfares and automobiles respectively as business owners are not ready to absorb the new VAT regime alone.

Though the Federal Government, vide repeated clamour, had ordered the removal of VAT from airline taxes as the only multimodal transport system paying it but it has not been implemented more than one year after.

Analysts had further argued that even though the government begins the implementation of no VAT fees for air travellers, other aviation service providers may not be able to absorb the new VAT hike which will translate to higher service charges and eventual hike in airfares.