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Airlines Groan as FG Delays VAT Waiver Implementation

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  • Airlines Groan as FG Delays VAT Waiver Implementation

Four months after issuing an Executive Order for the removal of Value Added Tax from air transportation, the Federal Government has failed to implement the directive.

As at Sunday that no action had been taken on the pronouncement made by the Federal Government on June 6 that VAT should be removed from all forms of shared transportation.

VAT is charged as five per cent on every flight ticket sold by airlines and is remitted to the Federal Government.

At the inauguration of the Port Harcourt international airport last week, President Muhammadu Buhari, described the decision to remove VAT from domestic air transportation as being in line with global best practices.

He said the decision would make air travel more affordable and subsequently lead to the creation of jobs by the air transport service value chain as well as increase revenue for the government.

But airline sources, who did not want to be quoted, said they had only heard about the order but had yet to see it implemented.

“We have been waiting endlessly for its implementation, because it will go a long way to reduce the cost of air travel,” one of the sources stated.

The Airline Operators of Nigeria, the umbrella body for airlines in the country, had estimated that its members were paying over N10bn as taxes annually, a situation that was threatening their operations.

Among the charges paid by domestic operators are landing and parking fees, fuel surcharge, passenger service charge, ticket sales charge, ground rent and VAT.

Others are terminal charges, apron licence charge, vehicle permit charge, apron pass charge and toll gate charges, among several others.

Prior to the Executive Order, the AON had threatened that its members would no longer pay VAT with effect from June 14, 2018.

The group said VAT remittance was unfair, as only domestic airlines were made to pay, while foreign airlines were exempted.

The AON lamented that air travel was also the only mode of transportation that was subjected to the payment of VAT, which had resulted in airlines not being able to optimally utilise their aircraft assets.

The group had said, “The AON’s position is that VAT on airline ticket sales for domestic carriers must be removed completely forthwith as road transportation, rail, marine and international air travel carriers are not subjected to VAT.

“Nigerian domestic airline travel is the only mode of transportation paying VAT in the country today as road, rail, marine and international airlines do not pay. Moreover, a situation whereby some airlines are paying VAT, while some other privileged airlines are not paying VAT, and the VAT which we pay is being used to subsidise our competitors against those that are making payment is unfair.”

The AON lamented that a recent report by the Federal Airports Authority of Nigeria showed that passenger traffic dropped by 27 per cent in 2017 and by another seven per cent in the first quarter of 2018, making it a total of 34 per cent drop in passenger traffic within a span of one year due to the high cost of flight tickets.

The Chief Operating Officer, Dana Air, Mr Obi Mbanuzuo, had in a recent interview stated , “If Dana flies internationally, it will not be charged VAT; but when it does domestic, it is charged VAT at five per cent.

“If VAT was removed, which we are currently fighting for with the minister, it will allow tickets to be cheaper.”

Before the pronouncement, a presidential committee set up late last year to review airlines’ taxes and charges and headed by the Minister of State for Aviation, Senator Hadi Sirika, had picked the removal of VAT as one of the first issues to be dealt with.

Efforts to get the Federal Inland Revenue Service’s comment on the development proved abortive, as the government agency insisted that it was a policy issue.

However, the Director of Air Transport Regulations, Nigerian Civil Aviation Authority, Group Capt. Edem Oyo-Ita (retd), said there had been no formal instruction from the Federal Government to stop the domestic carriers from paying VAT.

Oyo-Ita, who is a member of the Presidential Committee on Airlines’ Taxes and Charges, said the regulators would not rely on verbal pronouncement only.

“What airlines need to do is to put pressure on the government, because the order has not been gazetted,” he stated.

The General Manager, Public Relations, NCAA, Mr Sam Adurogboye, described the development as a policy matter that required discussion among stakeholders

“The airlines need to establish contact with the FIRS through the Ministry of Aviation to quicken the implementation of the order,” he said.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

Economy

Nigeria, Morocco sign MOUs on Hydrocarbons, Others

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The Federal Government and the Kingdom of Morocco have signed five strategic Memoranda of Understanding that will foster Nigerian-Morocco bilateral collaboration and promote the development of hydrocarbons, agriculture, and commerce in both countries.

The Minister of State for Petroleum Resources, Chief Timipre Sylva, led the Nigerian delegation to the agreement signing ceremony on Tuesday at Marrakech, Morocco, while the Chief Executive Officer of OCP Africa, Mr Anouar Jamali, signed for the Kingdom of Morocco, according to a statement by the Nigerian Content Development and Monitoring Board.

Under the agreement between OCP, NSIA and the Nigerian National Petroleum Corporation, Nigeria will import phosphate from the Kingdom of Morocco and use it to produce blended fertiliser for the local market and export.

The statement said Nigeria would also produce ammonia and export to Morocco.

“As part of the project, the Nigerian Government plans to establish an ammonia plant at Akwa Ibom State,” it said.

The Executive Secretary of NCDMB, Mr Simbi Wabote, and the Group Managing Director of NNPC, Mallam Mele Kyari, were part of the delegation and they confirmed that their organisations would take equity in the ammonia plant when the Final Investment Decision would be taken, the statement said.

Sylva said the project would broaden economic opportunities for the two nations and improve the wellbeing of the people.

He added that the project would also positively impact agriculture, stimulate the growth of gas-based industries and lead to massive job creation.

He said the President, Major General Muhammadu Buhari (retd.), had mandated the Ministry of Petroleum Resources and it agencies and other government agencies to give maximum support for the project.

“He mandated me to ensure that at least the first phase of this project is commissioned before the expiration of his second term in office in 2023,” he added.

According to the statement, the MOUs were for the support of the second phase of the Presidential Fertiliser Initiative; Shareholders Agreement for the creation of the joint venture company to develop the multipurpose industrial platform and MOU for equity investment by the NNPC in the joint venture and support of the gas.

Other agreements are term sheet for gas sales and aggregation agreement and MOU for land acquisition and administrative facilitation to the establishment of the multipurpose industrial platform for gas sales and aggregation agreement.

The NCDMB boss described the bilateral agreement as significant to the Nigerian economy as it would accelerate Nigeria’s gas monetisation programme through establishment of the ammonia plant in the country.

The agreement would also improve Nigeria’s per capita fertiliser application through importation of phosphate derivatives from Morocco, he added.

Wabote challenged the relevant parties to focus on accelerating the FID, assuring them that the NCDMB would take equity investment for long-term sustainability of the project.

He canvassed for the setting up of a project management oversight structure to ensure project requirements and timelines are met.

“There is also need to determine manpower needs for construction and operations phase of the project and develop training programmes that will create the workforce pool from Nigeria and Morocco and design collaboration framework between research centres in Nigeria and Morocco to develop technology solutions for maintaining the ISBL and OSBL units of the Ammonia complex,” he said.

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Dangote Fertiliser Plant to Commence Shipment of Urea in March 2021

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Dangote to Sells Petrol in Naira, Plans to Commence Urea Shipment in March 2021

The Governor of the Central Bank of Nigeria, Mr. Godwin Emefiele, has said Dangote Fertiliser Plant will commence shipment of Urea in March 2021.

The CBN governor disclosed this during an inspection tour of the sites of Dangote Refinery, Petrochemicals Complex Fertiliser Plant and Subsea Gas Pipeline at Ibeju Lekki, Lagos on Saturday.

Emefiele further stated that Dangote Refinery would sell refined petroleum products in Naira when it starts production.

This he said would save the country from spending 41 percent of the nation’s foreign exchange on importation of petroleum products yearly.

Based on agreement and discussions with the Nigerian National Petroleum Corporation and the oil companies, the Dangote Refinery can buy its crude in naira, refine it, and produce it for Nigerians’ use in naira,” Mr Emefiele said.

That is the element where foreign exchange is saved for the country becomes very clear. We are also very optimistic that by refining this product here in Nigeria, all those costs associated with either demurrage from import, costs associated with freight will be totally eliminated.

Emefiele explained that this will make the price of Nigeria’s petroleum products affordable and cheaper in naira.

If we are lucky that what the refinery produces is more than we need locally you will see Nigerian businessmen buying small vessels to take them to our West African neighbours to sell to them in naira.

“This will increase our volume in naira and help to push it into the Economic Community of West African States as a currency,” Mr Emefiele said.

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Economy

UK Budget 2021: Will Sunak’s Budget Run Into Unintended Consequences?

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Rishi Sunak’s Budget will encourage higher earners to consider their “international financial options” and will drive businesses away from the UK, warns the CEO of one of the world’s largest independent financial advisory and fintech organizations.

The warning from Nigel Green, chief executive and founder of deVere Group, comes as the Chancellor delivered his 2021 Budget in the House of Commons, his second since he took on the role.

Mr Green says: “The Chancellor has got an extraordinarily difficult hand to play as he tries to stem the economic damage caused by the pandemic, support jobs and businesses and, crucially, rebuild the public finances.

“Whilst Mr Sunak is being hailed a hero for the continued and unprecedented levels of support, it should also be remembered that he is – in a stealth move – dragging more people firmly into the tax net.

“He is raising taxes under the radar.

“Yes, there is no income tax rise. However, he is freezing personal tax thresholds, meaning as incomes rise and thresholds don’t, he is able to raise money by fiscal drag.”

Earlier this week, the deVere CEO noted: “Those most impacted by this stealth move will be looking at the financial planning options available to them, including international options, in order to grow and protect their wealth.”

Rishi Sunak also confirmed that corporation tax will increase to 25% from 2023, up from the current level of 19%.

Of this tax hike, Mr Green goes on to say: “Lower corporation tax helps job and wealth-creating business to survive and thrive. It also helps attract business to move and invest in the country.

“Instead of increasing taxes, Mr Sunak should have relentlessly focussed on growth and stimulus policies for businesses.  This would have been of greater help to firms, the economy, jobs and, ultimately, the Treasury’s coffers.”

He adds: “Again, this corporation tax hike is likely to serve as a prompt for businesses to consider their overseas financial options.”

The deVere CEO concludes: “The Chancellor had to perform a tough juggling act.  But stealthily dragging more people into the tax net and raising corporation tax might have negative, unintended consequences for the Treasury’s bottom line.”

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