The Presidential Fiscal Policy and Tax Reform Committee (PFPTRC) has said the new tax laws slated to commence in January 2026 are structured to lower operating costs for airlines, countering fears that the reforms could cripple the aviation industry.
The committee was responding to comments by Air Peace Chairman and Chief Executive Officer, Allen Onyema, who warned during a television interview that the Nigeria Tax Act and related fiscal changes could trigger sharp increases in airfares and threaten the survival of domestic airlines.
Onyema had argued that the reforms would reintroduce a 7.5 per cent value-added tax (VAT) on aircraft, engines and spare parts charges that were suspended in 2020 during the COVID-19 pandemic potentially pushing economy class fares from about N350,000 to as high as N1.7 million.
However, in a statement posted on X on Monday, PFPTRC Chairman, Taiwo Oyedele, said the concerns were misplaced, stressing that the reforms were designed as part of the solution to the industry’s long-standing cost challenges.
Oyedele acknowledged that Nigeria’s aviation sector faces significant pressure from multiple taxes, levies and regulatory charges, noting that the committee has held extensive consultations with airline operators and that discussions are ongoing.
According to him, several key tax issues that have historically driven up costs for airlines have either been resolved or structurally addressed under the new laws. He cited the removal of the 10 per cent withholding tax (WHT) on aircraft leases as a major relief.
Under the existing regime, airlines pay a non-recoverable 10 per cent WHT on aircraft leases, which directly raises operating costs and strains cash flow. Oyedele explained that the new laws have eliminated this provision and replaced it with a rate to be set by regulation, creating room for a full exemption or a significantly lower charge.
He added that while the temporary VAT suspension introduced in 2020 appeared beneficial, it had unintended consequences. Airlines were unable to recover input VAT on certain assets, consumables and overheads, causing VAT costs to be embedded in their expenses.
Under the new framework, airlines will become fully VAT-neutral, with VAT paid on imported or locally sourced goods and services fully recoverable.
The law also provides for VAT refunds within 30 days, backed by a dedicated refund account and the option to offset excess credits against other tax obligations.
The committee further clarified that existing VAT exemptions on commercial aircraft, engines and spare parts remain intact, insisting that the reforms do not introduce any new tax burden in this regard.
On ticket pricing, the PFPTRC said that even with a 7.5 per cent VAT on tickets, the net impact would be far lower than suggested because input VAT would be recoverable. It noted that, at worst, a N125,000 ticket would rise to about N134,375, while a N350,000 ticket would increase to roughly N376,250.
Additional reliefs under the reforms include a framework to cut corporate income tax from 30 per cent to 25 per cent, as well as the harmonisation of several profit-based levies such as Tertiary Education Tax, NASENI, NITDA and Police levies—into a single development levy to reduce complexity and improve certainty.
While conceding that airlines face a real burden from multiple non-tax levies on operations and tickets, the committee stressed that these charges were not created by the new tax laws and should not be attributed to the reforms.
Oyedele said the government is working with operators and relevant agencies to address these issues, adding that the tax harmonisation measures mean conditions for airlines should improve, not worsen, from 2026.
Overall, the committee maintained that the new tax laws provide a stronger legal and policy framework to resolve long-standing challenges in the aviation sector, cut operating costs and limit the impact on passengers, urging stakeholders to rely on facts as engagement with the industry continues.
