Even with the proposed ambitious revenue regime for the aviation industry by the Federal Ministry of Finance in concert with the Federal Inland Revenue Services (FIRS), aviation sector stakeholders insist still that the sector is huge on revenue loss and want the new administration to beam its searchlight on operations of private luxury jet operators in the country, writes Olaseni Durojaiye.
Against the backdrop of continued allegations of huge revenue losses in the nation’s aviation sector and buoyed by a report in Orodata, an online platform which pointed out how Nigeria could reap over N38 billion from taxes on private jets and international flights, insiders in the sector have again rekindled the call for a searchlight on the sector with a view to blocking all revenue leakage points. THISDAY’s checks particularly fingered the regulation and administration of operations of luxury private jets in the country as far from being in accordance with global best practice standards. The renewed calls were coming months after a new tax regime was proposed for the industry by the immediate past Minister of Finance and Coordinating Minister for the Economy, Dr Ngozi Okonjo-Iweala in concert with the Federal Board of Inland Revenue (FIRS). The tax regime shared common grounds with the Orodata report. Interestingly, knowledgeable aviation sector insiders disagreed with some portions of both the report and the proposed tax regime.
Though the call started at the twilight of the administration of former President Goodluck Jonathan, it has however refused to peter away; rather, aviation industry insiders who spoke to THISDAY insisted that the revenue losses being recorded in the sector were capable of buffering the country’s revenue short fall from the oil sector and called for the institution of an Information Technology (IT) based flight traffic tracker away from the manual-currently in use in the sector. Orodata, in the report titled “How the FG will raise N38 billion from taxing international flight and private jets,” explained among others that, at N14.6 million annual tax per private jet, the country will earn N7.9 billion from the 190 registered private jets operating in the country. According to the sight still, Nigeria records !two million business class and first class travels among the 26 foreign airlines operating in the country, adding that at N15, 000 foreign travel surcharge on all the two classes of travels, the country stand to earn N30 billion annually.
In response to THISDAY enquiries, an industry insider, Olumide Ohunayo corroborated the Orodata report and stated that connivance between government functionaries and some industry regulators have continued to rob the country of huge revenue accruable from the aviation sector and called on the new administration to beam its searchlight on the industry. Ohunayo said that, “the country stands to reap billions of revenue in taxes, especially on private jets and international flight coming and going out of Nigeria if the tax regime proposed by the former minister is judiciously implemented.” While welcoming the proposed tax regime on operations of private jets in the country as well as foreign business and first class foreign travels, he told THISDAY that granting private jets waivers was an anomaly and argued that governments in developed economies deploy taxes on private jets to the development of the industry. Ohunayo stressed that private jets should attract taxes being luxury endeavour and not doing so is a revenue loss. “The assumption that the astronomical increase in the number of private jets during the last regime was an indication of Nigeria’s improved economy is a fallacy. The tax regime proposed by the former Minister for Finance and Coordinating Minister for the Economy, Dr Ngozi Okonjo-Iweala was a welcome development inasmuch as it is not an end in itself. If we must arrest the revenue loss in the aviation sector, it is somewhere to start from.
“Everywhere in the world private jets are taxed because they are luxury endeavours. In fact, the taxes are deployed to develop the aviation industry, so granting waivers to private jet is wrong; it is an anomaly and amounts to revenue loss; it should stop and that is why one is calling on the new administration to beam its searchlight in the industry. Besides, the practice of private jets buying aviation fuel at the same price with commercial airlines is wrong. “More so, it is high time Nigeria moved away from manual recording of flight traffic to Information technology based model as the current model also leads to revenue losses especially during the weekends. What obtains is that most international flights between 4 pm on Fridays and 8 am on Mondays are not captured or recorded, of course that amounts to another revenue leakage that needs to be blocked. Meanwhile, another source that wished not to be named told THISDAY that “Orodata estimated revenue losses were exclusive of taxes payable on Hire and Reward service by the private jets.”
However, another industry insider, Captain John Ojikutu cautioned against a holistic adoption of the proposed tax regime and argued that while the taxes on private luxury jets were in order the proposed N15, 000 surcharges on business and first class travels amounted to multiple taxations. He also debunked the claim in Oradata report that put international passenger flights at 2 million and argued that “the idea of the FIRS generating an expected 37 Billion luxury tax from private aircraft operators and two million Business and First Class passengers is a dream that cannot be realised, because there are no two million of the First and Business class passengers in the five million international passengers. Available figure from the FAAN 2013 statistics can only ascribe two million to all international outbound passengers and that would include Economy passenger. In effect, the First/Business Class Passenger cannot be more than 20% of the 2 million passengers.”
Captain Ojikutu also doubted the sincerity of the proposed tax regime and described it as ill-informed, adding that it was a gimmick to cover up for the lapses of the Nigerian Customs Service (NCS) and the inability of the service to collect due Customs duty from all the private jets operating in the country. According to him, the Okonjo-Iweala proposed tax regime was silent on the unpaid Customs Duty on many of the private jets operating in the country. He also stressed that “While the idea of imposing luxury tax on owners of private aircraft or their operators is understandable, the idea of imposing such taxes on Business/First Class passengers is irrational, ridiculous and unrealistic. Already, there are various taxes and charges on the fares paid by all international passengers including those in the Business/First Class raging from the $50.00 Airport Passengers’ Service Charge to the 5% Sales Tax on the cost of tickets and the Federal Inland Revenue Service (FIRS) 5% VAT. The planned FIRS 15,000 as luxury tax can only be additional and therefore double taxation on these categories of passengers who are paying far more from the 5% on 850,000 and 2.5 million costs of tickets for business and First Class passengers respectively.”
“My sense and knowledge of the industry tell me that many of the private aircraft owners or operators evade custom duties and that explained why most of them retain the foreign registration on their aircrafts. They request for all sorts of timeline variations and concessions for short stay in the country from the Nigeria Civil Aviation Authority (NCAA). Most of the time, they exceed their stay in violation of the Nigeria Civil Aviation Regulations(NCARs) They use these concessions to gallivant from one airport in the country to another operating hire and reward businesses at the expense of domestic airlines. Ordinarily, the NCARs does not provide for foreign registered aircraft to operate within the country or outside the airport of initial entry. Exception to the rule can be to only one airport and if and only if it is discretionary approved by the Director General of Nigeria Civil Aviation Authority. Otherwise, the aircraft would need to apply for deregistration, validate its documents for Nigeria registration and that would include paying the appropriate custom duties
“If they are not paying before now and are not enjoying any form of waiver, the private aircraft owners and importers should be paying about 30% Custom Duties on the aircraft that most on the average, cost between $5-10 Million. Considering their numbers now in the country, that should be a huge revenue source of about ₦200 – 500 Million duties per aircraft to the Ministry of Finance through the Nigeria Custom Services. However, if the Ministry of Finance is not getting the desired revenue from these entities, before imposing the luxury tax on them, it should find out from the Customs Services if owners or importers of the aircrafts paid the appropriate Custom Duties as importers of luxury cars would pay at the sea ports before they are released to operate on public roads outside the port of entry,” he maintained in a written response to THISDAY enquiries. Orodata put the number of registered private jets operating in the country at 190. Even with the noticeable areas of disagreement in responses to THISDAY enquiries among aviation sector insiders, they were all the same unanimous that the industry has been recording revenue losses all along and called on the new administration to plug the noticeable loophole.
http://www.thisdaylive.com/articles/aviation-sector-stakeholders-seek-end-to-huge-revenue-losses/216267/
