Prospective air travelers may soon face serious hike in the cost of air tickets following the recent increase in VAT from 5 per cent to 7.5 per cent.
President Muhammadu Buhari had on Monday signed the new Finance Bill into law which increases the VAT and other sweeping changes in Nigeria’s tax system.
According to operators in the Nigerian aviation sector, the VAT increase would force them to increase airfares. Unfortunately, it is the air travellers that will bear the cost.
One of the operators was quoted as saying the following: “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.”
In the meantime, there are also speculations that any increase in airfare will automatically cause the number of air travellers in the country to reduce. A member of the Aviation Roundtable, Olumide Ohunayo, said this could ultimately affect the earning power of airlines in the country.
“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 an improvement in passengers.”
It should be noted that the government previously planned to exempt airlines from remitting VAT. However, this plan has not been implemented, according to aviation stakeholders.
The Finance Bill, which was recently signed by President Muhammadu Buhari, exempted increase of VAT for SMEs and certain goods and services.