Hike in air fares imminent over 50% VAT increase

There are fears that airline passengers may begin to pay more following the implementation of the 50 per cent hike in value added tax (VAT), Daily Trust can report.

Following the signing into law of the 2019 Finance Bill by President Muhammadu Buhari, the VAT payable on goods and services has increased from five per cent to 7.5 per cent.

While the government had clarified that the increment would not affect SMEs, this is not the case with airlines which have given indication of the possibility of fare adjustment.

This is coming amidst the non-implementation of the VAT waiver granted the air transport sub-sector two years ago.

For the past two years when the immediate past Finance Minister, Kemi Adeosun announced the VAT waiver for airlines, operators have fought tooth and nail to pressurize the Federal Government to implement the decision.

As at today, operators say the VAT waiver is only implemented on the pages of newspaper as they continue to remit the charge.

However, with the increase in VAT, air passengers are expected to bear the burden as they might have to pay more in ticket fares.

Many of the operators who spoke with our correspondent yesterday said the VAT increment would definitely take its tolls on air fares.

“Definitely passengers would have to bear the brunt. We have always advocated for VAT removal, the government approved it and we were relieved when the former Minister announced the waiver but up till now, it has not been implemented,” an operator said yesterday.

Minister of Aviation, Senator Hadi Sirika has always pleaded with the operators, saying the VAT increase would be implemented.

But the assurance did not come to fruition until the recent 50 per cent hike in VAT which implementation has commenced.

A spokesperson of Dana Air, Mr. Kingsley Ezenwa said the VAT increase would definitely affect air fares but not immediately.

He said: “We are still appealing because we have been saying they should remove and now they increased it. We know government wants to increase income but what about businesses and purchasing power?’

An aviation analyst and member of the Aviation Roundtable, Mr. Olumide Ohunayo said the increase in VAT would propel a drop in passengers which would affect the earnings from the industry.

He said: “VAT was approved to be removed by this government but there has been a delayed implementation of that policy. I hope it will eventually be implemented to have VAT removed from air transport.

“If it is not removed and the increment is now included in air transport, obviously fares would increase and if fares increase, you can be sure that passengers would drop and when passengers drop, almost all facets of the industry would be affected by the revenue loss and our dream of increasing the GDP might just be a mirage. You can only improve the industry when you have improvement in passengers.”


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