Evasion of tax by foreign airlines
Wednesday May 09 , 2012

The recent public hearing conducted by the Senate Committee on Aviation has revealed yet another dubious practice that has not helped the growth and development of the aviation industry in Nigeria.

While Nigerians are still grappling with the worrisome discriminatory air fares being inflicted on them by foreign airlines, the public hearing has revealed to the consternation of Nigerians that some foreign airlines are guilty of tax evasion. The affected airlines, from the evidence before the Senator Hope Uzodinma-led Committee, have been evading the five percent sales tax on Passenger Fuel Surcharge (PFS). While some of them failed to pay fully the five percent PFS, some others did not pay at all.

The airlines, according to the committee, include British Airways, Virgin Atlantic Airlines, Lufthansa, Air France-KLM, Emirates, Kenya Airways and South African Airways. However, while some of the indicted airlines have openly agreed to pay the tax arrears once they are computed by the relevant government agencies, some others like British Airways and Virgin Atlantic are denying liability of the tax arrears.

This is in spite of their indictment by the Nigeria Civil Aviation Authority (NCAA). From the submissions of the NCAA, some of the foreign airlines were in the habit of manipulating PFS in order to evade payment of the sales tax. NCAA has put the Naira worth of the unpaid ticket sales tax at about five billion naira per annum. It is obvious from this revelation that government has been losing huge sums of money as a result of these sharp practices by aviation industry operators.

This state of affairs is unacceptable.
But we wonder why it has to take the intervention of the Senate committee for this sleaze to be brought to the public domain. What this suggests is that the relevant aviation industry regulators such as NCAA, Federal Airports Authority of Nigeria (FAAN) and Nigerian Airspace Management Agency (NAMA), have not been alive to their responsibilities. If they had been, they would have made an issue out of this sordid situation. The fact that they knew nothing or said nothing and did nothing about this tax evasion raises questions. Were the concerned agencies complicit in this tax evasion issue? Or were they aware of it and chose to do nothing?

We raise these questions because Nigeria has remained a fertile ground for all manner of abuses largely because those whose responsibility it is to protect the interest of the nation have consistently failed to live up to expectation. That is why this manner of tax evasion by foreign airlines was possible. The development is therefore an indictment on the concerned aviation regulatory agencies.

However, it is gratifying that the Senator Uzodinma committee has come to the rescue. It has not only brought the unwholesome act to the fore, it has directed NCAA to ensure that the tax arrears are recovered from the concerned airlines. But the committee should not stop at this. It has to insist that its directive is carried out to the letter. Tax evasion is a criminal offence and should not be treated with kid gloves. Elsewhere in the world, the affected airlines would have been blacklisted and even prosecuted. We should therefore not let these airlines to continue to treat Nigeria as a no-man’s land.

The committee should also take interest in the ability of NCAA to recover the tax arrears. Since it could not get the foreign airlines to pay their taxes in the first place, we doubt its ability do so now, regardless of the directive from the committee. Where it becomes obvious that NCAA will not discharge this responsibility creditably, the committee should explore other options through which the tax funds could be recovered.

Beyond the issue of tax evasion, the committee should take a more holistic look at our aviation industry with a view to ensuring that institutional impediments are dismantled. That is why we recognize and endorse the plan by the Senate committee to see to the amendment of existing aviation laws such as Aviation Act 2006. It is high time regulators of our aviation industry became conversant with aviation tax laws. They cannot afford to operate with ignorance.

Their failure in this regard shows that our tax system is ineffective or inefficient. The foreign airlines may have manipulated the weakness and ineffectiveness of our system to evade the taxes. Our tax collection mechanism should therefore be strengthened. A review of the extant laws should be able to plug these loopholes. Nigeria is covered by International Civil Aviation Organisation (ICAO) laws. Our tax laws should therefore be strictly observed by all concerned.
We commend the Senate committee for its diligence and courage in unearthing this sleaze in our aviation industry.

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