How multiple taxations are stifling domestic airlines’ operations in Nigeria
Over 25 airlines have closed shop within a space of 25 years in Nigeria. The lifespan of airlines operating in Nigeria have continued to linger between seven and 10 years. The reasons for this are not far-fetched. Aside from cost of aviation fuel, infrastructure deficit and low purchasing power, multiple taxations are major problems bedevilling the smooth operations of domestic airlines, Ifeoma Okeke writes.
Airport taxes are levied on airlines for operating at the airport and using the services provided by the regulators and concessionaires. Taxes are generally imposed on the airlines for using the airport. Revenues from airport taxes are used to maintain airport facility.
However airline operators have alleged that while they pay exorbitant amount as taxes, the airport infrastructures have remained in shambles, making their operations difficult.
Nigerians airlines are faced with 34 charges levied against them by government agencies and organisations in the aviation sector that have made the nation’s aviation rank among the highest taxed sector in the world.
A document made by the Ministry of Transportation indicated that the charges and levies are apart from the five per cent Value Added Tax (VAT) paid into coffers of the Federal Government through the Federal Inland Revenue Service (FIRS).
The levies, according to the document, are divided into aeronautic and non-aeronautic revenues and are added to charges collected from passengers as air tickets.
Twenty-one of the charges are paid into the coffers of the Federal Airports Authority of Nigeria (FAAN), six are paid into Nigerian Civil Aviation Authority (NCAA) and the Nigerian Airspace Management Agency (NAMA).
The breakdown of aeronautic charges included aircraft inspection, which is tickets and Duty Tour Allowance (DTA) paid to the coffers of NCAA.
The DTA depends on the country the aircraft is being inspected, but a source said airlines pay at least $10,000 to the agency for each inspection of its aircraft. Also, landing charges are divided into two – day and night.
During the day, airlines pay N25 per kilogramme of the aircraft weight while they are charged N37.5 per kilogramme of the aircraft at night. FAAN collects the charge from airlines.
The Airline Operators of Nigeria (AON) has blamed the poor performance of domestic airlines on multiple taxation by various agencies in the aviation sector.
Nogie Meggisson, Chairman, AON, said airlines could play pivotal role in bringing the Nigerian economy out of recession.
“Rather, the system is continuously manipulating, feasting and pushing the financial envelope of airlines by inflicting multiple taxes and levies to the extent that airlines are now groaning under the pressure and some are going bankrupt.
“AON has been screaming and complaining about the same issue over the years that have culminated in sending over 27 airlines under in the past 25 years.
“A case in point is the recent takeover of Arik Air and Aero Contractors by AMCON in the face of huge financial burdens that have shown themselves as fallout of the multiple and sometimes unfair charges and taxes airlines are forced to grapple with on a daily basis.
“This is without recourse to the fact that aside from all the multiple charges, levies and fees, airlines still have to pay mandatory statutory corporate taxes to relevant agencies,” he said.
According to him, airlines meet so many costly foreign exchange components on daily basis that accounts for 70 to 80 per cent of their direct operational cost such as jet fuel, spare parts, insurance and simulator training among several others.
He said inspite of all these challenges , the agencies continue to overburden the airlines with multiple taxes and levies which further puts strain on their operations and finances.
“The Civil Aviation Act of 2006 (Part 18.12.3) requires that the NCAA regulates civil aviation and the charges imposed by civil aviation authorities and/or agencies.
“These charges, in consultation with stakeholders, are to be approved and reviewed periodically by both parties.
“On the contrary however, airlines are saddled with charges without any form of consultation whatsoever.
“Domestic airlines, on the average, pay about 35 per cent to 40 per cent of a ticket cost as taxes and charges that come under the guise of statutory levies in addition to other charges.
“These include 5 per cent Ticket Sales Charge, 5 per cent Cargo Sales Charge, 5 per cent Value Added Tax (VAT), Passenger Service Charge, Charter Sales Charge, Aircraft Inspection Fees, Simulator Inspection Fees, Landing Charges and Parking Charges
Others are Terminal Navigational Charge, Enroute Charge, Fuel Surcharge, Airport Space Rent, Electricity Charges, and Apron Pass, Ramp Access Charges, ODC and a newly imposed Registration Fee all of which are paid to government agencies.
“Many of these taxes and charges amount to double taxation such that any incentive seemingly provided by government to airlines is taken back by the agencies,” Meggisson said.
He added that even with all these charges, many of the airports in the country do not have runway lights and navigational landing aids which meant such airports are only open between 7am and 6pm daily.
Foreign airlines operating in Nigeria have also lamented the high charges leveled against them by government agencies in the aviation industry and described the Murtala Muhammed International Airport (MMIA), Lagos as the most expensive airport in the world.
The international carriers urged the agencies to harmonise the charges and noted that with low charges more airlines would operate into the country, which would attract more revenues and create more jobs in the long run.
Speaking under the auspices of Association of Foreign Airlines and Representatives in Nigeria (AFARN), the operators said the multiple charges are affecting their operations in the country.
Philip Wetherall, Director of Virgin Atlantic Cargo in Nigeria, said that with the multiple charges imposed on the foreign operators, investment opportunities would continue to elude the country.
For instance, he said that the airlines pay N5000 per kilo on exported goods and N7000 per kilo of imported goods to the Federal Airports Authority of Nigeria (FAAN) in addition to other charges.
He observed that despite the exorbitant charges, facilities on ground most of the airports could not justify the charges, stressing that the facilities require massive improvement.
He called on all agencies in the sector to harmonise their charges and review them downwards to attract more investment into the country, adding that this act was also affecting the contribution of the industry to the Gross Domestic Product (GDP) of the nation’s economy.
“There should be collaboration among government agencies in the sector. Lagos Airport is one of the most expensive airports in the world to operate into. However, we still need to improve our services and infrastructure to meet up with international community.
“The fact still remains that more revenues we earn, more money to the coffers of the government. Aviation in Nigeria needs to be revolutionalised.”
Kingsley Nwokoma, President of AFARN, noted that multiple charges have been a major challenge to the operations of airlines in the country.
He recalled that the federal government through the Ministry of Transportation, Aviation Unit, set up a committee to address the challenges including multiple charges complaints by the operators, but regretted that nothing came out of the committee.