Tinubu’s Tax Reform: Ticket Fares Set to Rise as FG Insists Airlines Must Pay VAT

Tinubu’s Tax Reform: Ticket Fares Set to Rise as FG Insists Airlines Must Pay VAT

 

Air passengers in Nigeria may soon face higher ticket prices as the Federal Government has insisted that airlines must begin paying Value Added Tax (VAT) under the new Tax Reforms Act, scheduled to take effect from January 1, 2026.

 

The directive, announced during a Business Webinar on Thursday organized by Aviation & Allied Business in collaboration with the Federal Inland Revenue Service (FIRS), has sparked sharp reactions from industry stakeholders and international aviation bodies.

 

Speaking at the event, Mrs. Nkechi Umegakwe, Assistant Director at the Nigeria Revenue Service (formerly FIRS), stressed that the government had carried out extensive due diligence before enacting the new law. She said the policy aims to boost revenue generation, simplify Nigeria’s tax system, and ensure stronger compliance through digital invoicing and tracking.

 

“VAT is a consumption tax to be borne by the end users, not the suppliers. From January 2026, whatever you bring in as an airline – aircraft, engines, spare parts, and tickets – you must pay VAT on them. Airlines can request a refund where applicable, but exemptions will no longer apply,” Umegakwe explained.

 

Currently, airlines are exempted from paying import duties and VAT on aircraft, engines, spare parts, and tickets, a policy introduced in 2021. The new reforms will end those exemptions.

 

However, the International Air Transport Association (IATA) has strongly criticised the move, accusing the government of breaching international agreements. Dr. Samson Fatokun, IATA’s Area Manager for West and Central Africa, warned that the reform contravenes both the December 2024 ECOWAS Treaty—which prohibits taxes on air passengers and cargo—and Nigeria’s obligations as a member of the International Civil Aviation Organisation (ICAO).

 

“Aviation is a global business. Nigeria signed treaties that prohibit VAT on air transport. By reintroducing VAT, the government is contravening its own commitments. The sector is about cost recovery, not revenue generation,” Fatokun stated.

 

Industry experts have also voiced concerns about the burden of multiple taxes. Airlines already pay a 5% Ticket Sales Charge/Cargo Sales Charge (TSC/CSC), which stakeholders argue has inflated fares and discouraged air travel.

 

Aviation consultant Capt. Samuel Caulcrik cautioned that combining VAT with TSC/CSC amounts to double taxation and could further weaken an already struggling sector.

 

“This will choke operators and cut off more passengers. If people already avoid flying due to the 5% TSC/CSC, adding 7.5% VAT will push even more out of the system and cripple performance,” he warned.

 

Mrs. Nkechi Onyenso, Managing Director of Pathfinder Securities, urged the government to engage further with industry stakeholders, highlighting how foreign exchange scarcity and multiple taxation already weigh heavily on operators.

 

While acknowledging that the Tax Reforms Act offers certain advantages, stakeholders insist that the government must strike a balance between revenue generation and sustaining growth in Nigeria’s aviation industry.

 

For now, unless the Federal Government bows to pressure, passengers should brace for a sharp rise in ticket prices once the reforms kick in on January 1, 2026.