FIRS OFFERS AIRLINES SOFT LANDING - By Tumininu Ayerin
The Federal Inland Revenue Service (FIRS) has
pledged its support to encourage domestic airlines in an unprecedented move to
ensure that airlines remain in operations duing this tough economic times while
also meeting their VAT Remittance obligations.
During a meeting in his office with a delegation
of the Airline Operators of Nigeria (AON) and IATA, the Chairman of the Tax
Agency, Dr. Babatunde Fowler said: “We agree that the airline industry is
challenged. Government is not out to make profit but to make life more
comfortable for the people. Exemptions on tax issues are beyond FIRS as they do
not make the law. So, all we can do is offer to make it easier to give domestic
airlines a soft landing by meeting them halfway in order to obey the tax laws.”
The Chairman of AON, Capt. Nogie Meggison noted
that: “Airlines have no issue with paying or collecting the statutory VAT for
FIRS but that there was need to take a look into the issue of fairness against
our competitiotrs, clarity on the automation as well as, a 30 days period to
allow for invoicing, reconciliation and billing before payment. He therefore
called for more dialogue between the FIRS and AON in order to better understand
the automation process and allow smooth operations for both parties.”
Responding, Dr. Fowler expressed understanding
for the many challenges and multiple charges airlines are faced with. He
therefore admonished AON to engage the Presidency through the Department on The
Ease of Doing Business, the Senate and the Minister of Finance to dialogue on
how the laws could be amended so that airlines can be at par with their
competitors and as the norm worldwide in order to address the challenges by
coming up with a lasting solution.
As a way of giving domestic airlines a soft
landing however, Dr. Fowler proposed that because of the payment structure FIRS
can give airlines a concession of two months after the billing period (M+2) to
make their VAT remittances so that collections done now are swept during the
upper month instead of the following month immediately after so as to give room
for reconciliation and for airlines to recoup their credit sales. “Even with
the AutoCollect, we can programme it at 50% so that way we don’t expect
everything to be swept off at once,” Fowler added.
Capt. Meggison thanked the FIRS boss for his kind
consideration and the concessions offered to airlines as a step forward in
alleviating one of the many challenges that has consumed noless than 25 airlines
over the years.
He however informed that: “going by a recent
study; the greatest competitor of airlines in Africa is not low cost carriers
but the road transport. Yet he observed that road transportation, marine and
rail transport do not pay VAT while Domestic Air Transport pays. He also
stressed that even foreign airlines don’t pay VAT both in Nigeria and in their
home country.
The IATA Area Manager, South West Africa, Dr.
Samson Fatokun said airlines in Nigeria have an average mortality rate of about
10 years noting that there was an inherent problem in the environment that
continues to lead to this mortality rate. He therefore called on the FIRS to
view the issue as a case for airlines to survive and the industry to be
sustained.
He observed also that about 60% of tickets sold
are sold by travel agents and that airlines don’t get the money until two weeks
later via the BSP or 45 days later due to the issue of credit offered to the
Agents. Hence, it will not be fair if the proposed automation of airline VAT
remittance is being charged realtime immediately after sales for money that airlines
are yet to receive. He therefore called on FIRS to look at the bigger picture
on the long term and consider how to help sustain the aviation sector.
The AON Chairman therefore appealed further to
the Chairman of FIRS to take a closer look into the issue of VAT for domestic air
transportation in Nigeria. He noted that if VAT were to be removed it will make
it more affordable for passengers with less funds at this time of economic
recession to be able to fly thereby increasing turnover generated by airlines
thereby resulting in increased revenue to FIRS from more passenger traffic,
more landings and a boost of other direct and indirect businesses linked to
aviation.
“Accra has become the hub for doing business in
West Africa today due to the fact that Accra has adopted a deliberate economic policy
to make Accra a hub for West Africa and as a way of achieving this has adopted
zero VAT for air transportation and also lowered taxes on JetA1 by 25% which
has attracted more airlines to fly into the country for Technical Stops and for
connections to cities around the world and has had a multiplier effect on the
economy and greatly increased activities in the sector and the country at
large.
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