BA, Air France-KLM Admit Evading Tax in Nigeria

2012-04-18
THISDAY Newspaper- Kunle Akogun


Major foreign airlines in Nigeria, especially the British Airways (BA), and Air France-KLM Nigeria, Tuesday admitted that they had failed to remit the five per cent Passenger Fuel Surcharge (PFS) on their tickets to Nigeria Civil Aviation Authority (NCAA) as required by global aviation practices.

Country Manager of BA, Mr. Kola Olayinka, told the Senate Committee on Aviation that organised an investigative public hearing on the violation of aviation laws by foreign airlines that, “no airline, as we speak, is remitting the five per cent charged on air fares to the NCAA. It is not only BA."

But the General Manager of Air France-KLM Nigeria, Mr. Christian Herpi, said if an extant Nigerian law required the airline to pay five per cent from the PFS, it was ready to comply, noting that it had been a practice by airlines worldwide and was not peculiar to airlines flying from Nigeria.

Olayinka also argued in the same line, assuring the committee that it was ready to comply with the directive, provided the legal requirement was clearly spelt out.

However, the Senate Committee on Aviation has threatened to recommend for prosecution BA for tax evasion.

The committee chairman, Senator Hope Uzodinma (PDP, Imo), said tax evasion is a criminal act and must be prosecuted accordingly.

The committee found that foreign airlines, including the BA, were not remitting the five per cent of PFS charged on air tickets to the NCAA as provided by law.

Uzodinma said: “Refusal to remit taxes is not a civil matter, it is a criminal offence which should be investigated by the appropriate department and we may have to do so.”

The committee chairman however faulted the argument of BA’s country manager, saying “That others are not paying doesn't make it right. The problem is that the NCAA continues to treat this matter as civil. Refusal to pay revenue to government is a criminal matter and we must treat it as such. We will invite relevant department to investigate the matter for possible prosecution.”

Uzodinma frowned on the refusal of BA to pay the five per cent tax even when the company enjoys tax relief due to the Bilateral Air Services Agreement (BASA) between Nigeria and Britain.

Although the airlines had argued that the PFS was charged by the airlines to cover the cost of aviation occasioned by global increases in crude oil, the committee noted that the airlines never reflected in the value of the PFS any fall in the price of crude at the international market.

According to the committee, it has been established that the PFS is the revenue accruing to the airlines, since it usually appeared in their account books as a major revenue source to the airline, which is taxable.

Uzodinma, however, tasked the NCAA to immediately commence the recovery of the taxes from the airlines as soon as possible.

Some members of the committee suggested that the refusal to pay the money amounted to tax evasion and should be treated as a financial crime.

Meanwhile, the foreign airlines have advised the country to establish a national airline as a step towards boosting the aviation industry.

They suggested that although some smaller African countries own national airlines with difficulty in management, Nigeria should be able to run a national carrier.

Herpi said he had travelled around Africa for many years and would advise strongly for Nigeria to own its national airline.

Olayinka said a national carrier would be an ideal project to be pursued by the present administration.

He said: “We need more airlines and a national carrier. If not we need to ensure that existing local airlines were supported to be able to fly the nation’s flag.”

Olayinka had argued that the law of demand and supply was responsible for the increase in the air fares as it affects First and Business Classes, recommending that more frequencies be allocated to airlines flying the routes concerned.

But the consultant for NCAA, Mr. Babatunde Irukera, said more frequencies would not address the problem which was created by the fact that most of the airlines do not have directed flight from Lagos to London.

He said 90 per cent of the travellers from Lagos to London go by BA and Virgin Atlantic, adding that passengers flying Air France and KLM to London are those who could not fly BA because of the cost.

Nigerians flying to London had little or no choice to make, given that only BA and Virgin Atlantic operate direct flights to and from London.

Irukera argued that although the BA and Virgin argue on the basis of economics, the issue transcended economics as it was a matter of law and legality.

The committee however noted that since the foreign airlines admitted to not paying the statutory 5 per cent from the PFS, the NCAA should endeavour to commence the collection of the levies from the airlines.


 

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