New tax regime will lead to massive increase in airfares—Air Peace chief Onyema

Allen Onyema, Air Peace’s chief, on Sunday said that the newly introduced tax policies would inflate airfares and drive airlines out of business.

Mr Onyema, speaking during a television show on Arise TV, warned of an imminent aviation crisis and called on the relevant authorities to urgently reverse the tax policy.

According to him, the newly introduced tax laws risk pushing ticket prices beyond N1 million. Mr Onyema said that portraying airline operators as profiteers misrepresents the reality of Nigerian aviation.

Mr Onyema stated that the bulk of the airfare paid by passengers was deducted for statutory charges, including excessive taxation, levies, and charges, leaving operators with only a fraction.

Mr Onyema stated, “The Nigerian airlines are heavily overburdened by taxes, levies, and all manner of charges. Just take a ticket of about N350,000.

What comes to the airlines is about N81,000. And people, everybody’s talking about the airlines as if they’re making a kill. It’s not true. We are suffering multiple taxations, multiple charges.

For example, the NCA, 5% for every ticket, Mandatorily. That is to NCA alone. There are so many other charges.”

Recalling the 2020 tax law, Mr Onyema, despite the concession that guaranteed the removal of customs duties and value-added tax on imported aircraft, spare parts, engines, and ticket fares, noted that airlines struggled with multiple taxation.

He said, “Now, the tax law of 2020 removed customs duties on imported aircraft and imported aircraft spares and engines, removed VAT on imported aircraft and other spare parts, and removed VAT on ticket fares. That is the 2020 act.

“Even then, airlines are still suffering from so many other multiple charges all over the country. Now, the new tax law has brought those things back. All of them.”

Faulting the new tax law, the CEO of Air Peace revealed that purchasing an aircraft, already valued at $80 million, would henceforth attract 7.5 per cent value-added tax.

Mr Onyema said, “There’s VAT now on the importation of aircraft. So if you buy an aircraft for $80 million, you are supposed to pay 7.5% of $80 million.

Funds borrowed from the bank are 30 to 35%. So you bring in spare parts, you pay 7.5% on your spare parts.

Ticket fares will hit $1.7 million soon. At 35% we are choking. You don’t do that.

“With 7.5% on ticket fares, ticket fares will hit $1.7 million soon. If we implement that tax reform, Nigerian airlines will go down in three months. At the end of the day, economy class tickets will go to about N1.7 billion if it happens.”

He disclosed that airline operators, under the aegis of Airline Operators of Nigeria, had presented the concern to the federal government, including the National Assembly and the tax reform committee.