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Nigeria Urged To Slash Tax Burden On Aviation

by Jason Gorringe,, London

12 September 2012

The Nigerian government has been urged to bring down the suffocating tax burden placed on the nation's aviation industry in a bid to improve safety after passenger numbers reportedly declined by a third following a devastating crash in June that shook passenger confidence.

Lobbying to have conditions improved for domestic airlines is being spearheaded by the head of the nation's Civil Aviation Authority, which has warned the government of the rapid decline of the domestic industry, which has seen 18 operators go out of business in recent years, including Air Nigeria, the nation's second largest airline, which confirmed its decision to bow out of the marketplace on September 10, taking with it 800 jobs.

The Authority has called on the government to remove customs duties on the purchase of aircraft and spares, which amount to a considerable proportion of the burden placed on the industry. In addition to customs duties, new aircraft purchases are subject to stamp duty and steep regulatory costs, and once operational high fuel duties and value-added tax on air fares adds to the industry's tax burden. Overall, it is said that duties and taxes add a third to the cost of purchasing new aircraft in Nigeria, and add considerably to operational and servicing costs.

In a recent company announcement, Harold Demuren, the Managing Director of a Nigerian domestic carrier, Aero, highlighted the distortion between domestic operators and their foreign counterparts in tax matters, and the lengths airlines are taking in an attempt to remain competitive: "Nigeria has relatively high import duties on aircraft parts," he said. "Airlines typically fly their aircraft to, say, Turkey to have them serviced and relevant parts replaced. Once that aircraft flies back to Nigeria, the new parts are not subject to import duties as they are already installed on the plane."

He added: "If Nigeria ever wants to allow for aircraft maintenance business to develop in Nigeria, it needs to create a level playing field between domestic and foreign operations. The resolution to this issue can be either that spares imported as installed on a plane are subject to import duty, or that Nigerian maintenance businesses would get import duty relief," he said.

TAGS: tax | business | Niger | Nigeria | aviation | stamp duty | import duty

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