Airlines fear new tax law may paralyse businesses, raise ticket fares, reduce passenger traffic

•         Reform may have devastating effects on aviation sector-Boyo
•         Tinubu already signed  treaty against tax on aviation-IATA
•          New Tax policy to enhance ease of doing business-FIRS

There is a consensus among airline operators and aviation allied companies that the new tax reform of the Federal Government is capable of doing incalculable damage to the aviation ecosystem.

Nigeria’s new tax law, enacted through the Finance Act 2023 and signed into law in June 2025, is expected to negatively impact its fragile aviation sector by reintroducing customs duties on imported aircraft and spare parts, and imposing Value Added Tax (VAT) on airfares, a measure previously waived.

This could cripple domestic airlines, many of which operate on razor-thin profit margins, by significantly increasing costs and potentially forcing them to pass these costs to passengers.

The airlines said the tax changes planned for implementation in January 2026 are contrary to the International Civil Aviation Organisation (ICAO)  standards and may lead to fare increases, reduced passenger loads, job losses, and a general decline in the industry.

The new tax law experts said may lead to an increase in the cost of tickets, as airlines are already gearing towards that.

The implication is that many more people may shun air travel as the number of people who take to air travel is already reducing.

The carriers are expected to balance their action as a rise in air fares could lead to a further reduction in the number of people who travel by air.

The experts at a Webinar held on Thursday called on President Bola Tinubu to cause a review of the tax reform, noting that its implementation restores the resumption of Value Added Tax (VAT) on commercial aircraft, commercial aircraft engines, commercial engine spare parts, airline transportation tickets issued and sold by commercial airlines registered in Nigeria, as double taxation.

Airlines were, in the wake of COVID, exempted from the payment of VAT on the items listed above, but are now liable to VAT in the new tax law.

The founder and Managing Director of Landover Company Limited, Capt Edward Boyo, while appealing to the President to take a further look at the tax reform which he admitted has so many benefits but at disadvantage to the growth of the aviation industry in Nigeria urged him and the Director-General of the  Federal Inland Revenue Service (FIRS), Dr. Zacch Adedeji to reconsider putting the sector on the priority sector list.

Boyo noted that with the present situation, it does not look like the government was ready to free the sector from the shackles of multiple taxation and levies, the two twin factors that have seriously plummeted the fortunes of the sector.

He said, “The country’s economy cannot grow without the aviation industry. Jobs cannot be created if nothing is done to improve the fortune of the industry. We call on the government to review the numerous charges and levies that affect airlines in the country. If not, we may see an increase in air fares because high costs of operation could lead to raising ticket prices”.

The International Air Transport Association (IATA) Area Manager for West and Central Africa,  Dr. Samson Fatokun, lamented the different levies imposed on airlines and several other companies in the sector, stressing that the new tax law would do incalculable damage to the entire aviation value chain.

Fatokun further stated that the aviation industry in Nigeria is an offshoot of international aviation bodies like the ICAO, a body of the United Nations, to which Nigeria is a signatory, and has been insulated from charges within.

“Nigeria is a signatory to ICAO, which is part of the UN, and cannot be bound by another treaty. In domestic aviation, we have VAT and other levies. We recall in 2004, when our President was chairman of the Economic Community of West African States (ECOWAS), there was a document signed by the President saying there wouldn’t be imposition of additional costs on air transportation”.

Brandishing a copy of the document, Fatokun said the document is available to any airline and experts in the sector, stressing that there was no need to contradict what has been signed.

“Those moveable assets cannot be taxed or apply tax law to that. The Nigerian tax authority needs to be in the know about the law governing aviation”, he added.

An economist and a former Rector of the Nigerian College of Aviation Technology (NCAT), Zaria, Capt. Samuel Caulcrick stated that the major funding of aviation agencies comes from 5% deductions from ticket sales and cargo charges, known as Ticket Sales Charges (TSC) and Cargo Sales Charges (CSC).

These charges that are paid for by passengers and remitted to the aviation regulatory body through the airlines are choking, adding, “It has reduced passenger numbers and freight movement. This new reform amounts to double taxation. The Federal Government should exempt aviation from this new tax reform”.

The Managing Director of Pathfinders International Limited, Mrs. Nkechi Onyenso, said there is a need for further engagement between airline operators and the FIRS because of the loopholes in the tax reform.

She said adding tax burden to the already stretched airlines and companies in the aviation sector would not only deplete traffic but also seriously affect carriers by adding increased costs of operation, even though she admitted the desirability of the tax reforms.

Assistant Director, FIRS, Mrs. Nkechi Umegakwe, who was the lead speaker at the Webinar moderated by a former Managing Director of the Federal Airports Authority of Nigeria (FAAN), Dr. Richard Aisuebeogun, said that when the tax base is broadened, it would help the government with money to run the economy.

She stated that the Federal Government had implemented a comprehensive tax reform initiative aimed at enhancing ease of doing business, boosting revenue generation, strengthening tax compliance and aligning the Nigerian tax system with global best practices across key sectors.

These tax reforms, according to her, introduce significant changes to existing tax law with certain implications for the aviation sector- a critical contributor to Nigeria’s economic growth and employment.

Wole Shadare