Tinubu’s Tax Ombudsman to Onyema, Airlines: New Tax Laws Will Cut Costs, Not Cripple Operations

By Yinka Giwa
Tinubu’s Tax Ombudsman, Taiwo Oyedele, has pushed back strongly against claims by airline operators that Nigeria’s new tax laws will damage the aviation industry, insisting that the reforms are designed to ease costs and stabilise airline operations, not worsen them.

Addressing concerns raised by industry stakeholders, including Air Peace Chairman Allen Onyema, Oyedele said the new tax regime tackles long-standing structural problems that have made airline operations expensive and unsustainable.

According to him, several legacy tax issues driving up operating costs in the sector have either been eliminated or fundamentally restructured under the new laws, making the reforms part of the solution rather than the problem.

At the centre of the relief package is the removal of the 10 per cent withholding tax on aircraft leases, described as the single biggest tax burden on Nigerian airlines. Under the old system, an airline leasing an aircraft valued at $50 million was forced to pay $5 million in non-recoverable tax, directly inflating costs and squeezing cash flow. The new law scraps this provision and replaces it with a rate to be set by regulation, creating room for a full exemption or a significantly reduced charge.

Oyedele also addressed concerns around Value Added Tax, noting that the much-praised VAT suspension introduced after COVID-19 came with hidden costs. Airlines were unable to recover input VAT on assets, consumables, and overheads, meaning VAT was quietly embedded in their operating expenses.

Under the new tax framework, airlines become fully VAT-neutral. VAT paid on imported or locally procured aircraft, spare parts, consumables, and services is now fully claimable. Where input VAT exceeds output VAT, the law mandates refunds within 30 days, backed by a fully funded tax refund account. Airlines may also offset VAT credits against other tax liabilities, a move expected to significantly improve liquidity.

On import duties, Oyedele reassured operators that existing exemptions on commercial aircraft, engines, and spare parts remain fully intact, with no new burdens introduced under the reforms.

He dismissed fears of steep ticket price increases as exaggerated, explaining that a 7.5 per cent VAT on tickets, within a system of full VAT recovery, has a far smaller net impact than headline figures suggest. Even in a worst-case scenario, he said, a ₦125,000 ticket would rise to no more than ₦134,375, while a ₦350,000 ticket would not exceed ₦376,250.

The new tax laws also provide a framework for reducing corporate income tax from 30 per cent to 25 per cent, offering further relief to airlines. In addition, multiple profit-based levies, including TETFund, NASENI, NITDA, and Police levies, have been harmonised into a single Development Levy, reducing complexity and ensuring certainty.

Oyedele acknowledged the problem of multiple levies and charges imposed on airlines and tickets but stressed that these were not created by the new tax laws. Blaming the reforms for them, he said, is misleading. He added that ongoing engagement between government, regulators, and operators is aimed at delivering a lasting solution, with tax harmonisation provisions ensuring conditions can only improve from 2026.

He concluded that the reforms provide a solid legal and policy framework to lower operating costs, fix long-standing distortions in the aviation sector, and minimise the impact on passengers, urging industry stakeholders to embrace dialogue rather than unsubstantiated claims.