The federal government announced the suspension of 7.5% Value Added Tax (VAT) on commercial flight tickets. This is coming because of the 2020 finance bill signed by President Buhari on December 31, 2020. Stakeholders in the aviation industry have since then expressed their joy and hope.
The finance bill exempts “airline transportation tickets issued and sold by commercial airlines registered in Nigeria” from VAT. It also exempts the purchase, lease, and rental of agricultural equipment’s.
In 2018, President Muhammadu Buhari announced the removal of 5% VAT from domestic flights. He said in his speech that it was targeted at creating more jobs.
“This would make air travel more affordable and as a result create more job opportunities in the aviation industry. Also, it would increase revenues for the government.”
The similarities in the reason for the removal of VAT from both commercial and domestic flight tickets is something most have remarked on. In a letter read to the senate and House of Representatives on December 1st, President Buhari stated that the 2020 finance bill prioritizes “job creation, socio-economic growth and much more.”
What Does The Suspension of VAT on Commercial Flight Mean for “Air farers”?
On if the suspension of the 7.5% VAT would affect the price of flight tickets, stakeholders in the travel industry have come out to speak. COO of Dana Air, Obi Mbanuzor expressed his happiness at the suspension but reiterated that other factors also affect the prices of flight tickets such as inflation to the dollar access.
“We are happy about the removal which we feel…will possibly bring fares down but with inflation of other aspects… like dollar rate, this might not be possible.”
However, he noted that while there might be an adjustment in flight fares, it would not be very significant. Another aviation investor noted that the tickets sold by airlines exempted VAT from its pricing even before the government announced the suspension.
“We wanted to find out if any airline had VAT included in its tickets, and it wasn’t so. So this so-called instruction is of no consequence whatsoever to fares. VAT was never a consideration.”
Head of research for Zenith travels, Olumide Ohunayo added his two pence and concluded that while the removal of VAT would lead to more transparent pricing structures, the price change would be slight.
What do you think? Should we expect a reduction in flight fares due to the suspension of VAT on commercial flight tickets or not? Let us know in the comments section below. Also, click here to read more on the Kenyan e-visa.