The Presidential Fiscal Policy and Tax Reform Committee (PFPTRC) has clarified that the new tax laws scheduled to take effect in January 2026 were designed to support, rather than harm, businesses, including airlines.

The clarification followed a claim by Allen Onyema, Chairman and Chief Executive Officer of Air Peace, that the new tax laws could trigger massive fare hikes and push airlines out of business.

Onyema, who spoke during a TV interview on Sunday, sounded the alarm on the implications of the Nigeria Tax Act and related fiscal policies set to take effect in January 2026. He claimed that the laws reimpose a 7.5 per cent value-added tax on aircraft imports, engines and spare parts, charges previously suspended in 2020 amid the COVID-19 crisis. He said the action could potentially push domestic economy class fares from the current N350,000 to as high as N1.7 million.

However, reacting through a statement via X on Monday, Chairman of the PFPTRC, Taiwo Oyedele, acknowledged the challenges facing the sector, including multiple taxes, levies and regulatory charges, noting that the committee has engaged extensively with airline operators.

“We recognise the genuine challenges facing Nigeria’s aviation industry, particularly the burden of multiple taxes, levies and regulatory charges. The PFPTRC, on behalf of the government, has engaged extensively with airline operators and those engagements are ongoing,” the statement read.

It said contrary to the claim that the new tax laws would hurt the industry, the reform is part of the solution, not the source of the problem. It noted that several long-standing tax issues driving costs in the sector have been resolved in the new laws or are being structurally addressed.

“The single biggest tax burden on airlines has been the 10 per cent withholding tax (WHT) on aircraft leases under the existing law. This has now been removed and replaced with a rate to be determined in a regulation, creating the legal basis for either a full exemption or a significantly lower rate.

To put this in context, on a $50 million aircraft lease, an airline currently pays $5 million in WHT, which is non-recoverable and therefore directly increases operating costs and strains cash flow. Eliminating this burden is a major structural relief for the sector.

“While the temporary VAT suspension introduced in 2020 following COVID-19 was attractive, it came with a hidden cost. Airlines could not recover input VAT on non-exempt items, including certain assets, consumables and overheads, meaning VAT became embedded in costs.

“Under the new tax laws, airlines become fully VAT-neutral. Any VAT paid on imported or locally procured assets, consumables, and services will become fully claimable. Where an airline has excess input VAT, the law mandates a refund within 30 days, supported by a fully-funded tax refund account and the option to offset VAT credits against other tax liabilities. This directly reduces cost pressure and improves liquidity.”

The committee went further to explain that existing exemptions on commercial aircraft, engines, and spare parts remain fully in place, insisting that there is no reversal or new burden introduced under the tax reforms.

Other reliefs for the airline industry provided by the new tax laws, according to the committee, include, knowing that airline operations are inherently low-margin, a 7.5 per cent VAT on tickets, within a system where input VAT is fully recoverable, results in a significantly lower net impact than the headline rate suggests.

“Even in a worst-case scenario where VAT was not claimable, the maximum impact would still be 7.5 per cent, not the price increases being suggested,” it said.

“That is, a N125,000 ticket becomes not more than N134,375 and a N350,000 ticket not more than N376,250.

“The new law provides a framework to reduce corporate income tax from 30 per cent to 25 per cent, which will benefit airlines. In addition, several earmarked profit-based levies, including Tertiary Education Tax, NASENI, NITDA and Police levies, have been harmonised into a single Development levy, reducing complexity and ensuring certainty.”

It acknowledged that the multiplicity of levies imposed on airlines and flight tickets is real, but added that these charges are not created by the new tax laws.

“It is therefore incorrect to attribute them to the reform. The government is actively working with operators and relevant agencies to achieve a lasting solution. Importantly, the tax harmonisation provisions in the new laws mean the situation can only improve, not worsen, from 2026.

“Overall, the new tax laws provide a strong legal and policy framework to resolve the long-standing tax challenges in the aviation sector, reduce operating costs for airlines, and ensure minimal impact on passengers.

“If the current engagement with industry stakeholders is sustained, the remaining non-tax issues will be resolved sooner rather than later. Claims not grounded in fact do not help this process. The new tax laws are not the problem; they are a critical part of the solution.”