Factors Responsible For Exorbitant Charges In Aviation, Other Sectors, By Expert

The Principal Partner of ASCO LP and expert in legal, arbitration and tax practice, Prof. Abiola Sanni (SAN) has highlighted the factors responsible for exorbitant charges for services in the aviation industry and other sectors of the Nigerian economy.

Speaking at the Quarter3 2023 Business Breakfast Meeting (BBM) of Aviation Safety Round Table Initiative (ASRTI) held at Gofview Hotel, Ikeja, Lagos under the theme, Nigerian Aviation Sector Charges, Duties & Tariffs: Truly Exorbitant?, Sanni identified proliferation of government agencies with overlapping functions, abuse of regulatory power for revenue purposes by ministries, departments and agencies (MDAs), inordinate revenue drive by government agencies to meet revenue targets, lack of an effective coordination of charges by MDAs, outsourcing of revenue collection by MDAs to private revenue agents and lack of sufficient government support for the growth of the sector as factors responsible for exorbitant charges, stating that Nigeria’s aviation sector is under the yoke of charges.

Breaking down payment for a ticket, he revealed that where base fare is N79,453, surcharge is N21,500. Passenger Service costs N2,000 while ticket sales charge is N5,048, stating that though the aviation sector is highly regulated, there is a question about effective mechanism for “regulating” the charges by regulators in Nigeria.

“Are there mechanisms for dealing with underlining ‘agency cost’ in Ministries, Departments and Government Agencies (MDA) bearing in mind that MDAs are not revenue agencies? Efficient regulation is desirable and should provide the pathway for growth. Why is the situation different in Nigeria?” he asked.

Clarifying the concepts and meanings of taxes and levies, Abiola defined tax as “a compulsory payment imposed by the government through a tax statute (enacted solely or mainly to raise revenue) for which no direct benefit accrues to the taxpayer. Taxes may go by different names such as duties, tariffs, etc. It is not a matter of nomenclature. A compulsory payment with ALL the features of a tax will be a tax, whether it is called a tax or a variant of a tax.”

He defined charge as ‘an amount demanded or promised as a price for a service rendered or goods supplied. Thus, a charge is a payment in exchange for goods or services. The words “charge” and “fee” are synonymous. A charge is generally not a tax. But a “Charge” will be a tax if it has all the elements of a tax such as “Land Use Charge” imposed by the Land Use Charge Law (LUCL) of Lagos State.”

He said: “Unlike taxes, charges are not compulsory. While the revenue derivable from taxes forms part of the general fund of the State, charges are usually earmarked for defraying the expenses incurred by the Ministry, Agency or Parastatals charged with the provisions of such services. Where a charge is exorbitant, it is an abuse of regulatory power.”

He defined tariff as “a list of prices – e.g. rooms and various items in the hospitality sector. In the tax environment, it refers to taxes imposed on imported and exported goods.”

In his concluding recommendations, Abiola said “future conversations should bear in mind that taxes and charges are different concepts. The Nigerian culture of conflating charges with taxes is counterproductive hence the need to disaggregate them. Every agency should have a comprehensive list of its charges the way NCAA has done for certainty and engagement by stakeholders. There is an imperative of a proper regulation and coordination of charges by MDAs to prevent abuse of regulatory power for revenue purposes. There is need for proper budgeting and financing of MDAs, in this case NCAA.”

He also recommended “ensuring that there is only one single revenue agency per level of government for MDAs to focus on their core objective. The government should develop a robust roadmap for the sustainable growth of the aviation sector.”

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