Govt plans luxury tax as more Nigerians buy private jets
SUPER-RICH Nigerians who move around the world in their private jets, enjoying ostentatious lifestyles may now have something to worry about, as the Federal Government has perfected plans to tap from their enormous reservoir of wealth, from which it hopes to rake in N38 billion yearly.
Nigeria, being home to the highest number of private jets on the continent, the Federal Government has come up with a newly introduced luxury tax to compel such high-net-worth individuals pay a liitle of the millions and billions into government coffers.
According to reports, Nigerian private jet owners have spent more than N1.5 trillion in foreign exchange to purchase these sky “toys.”
But with the recent introduction of the luxury tax by the Federal Ministry of Finance, following shortfall in revenue occasioned by the slump in oil prices, the Federal Government in trying to expand its income base, is now targeting rich Nigerians who own private jets or fly in premium cabins (first and business classes).
This category of Nigerians will pay the special levies known as luxury tax from which government, by this policy, hopes to generate almost billions of naira yearly, investigations by The Guardian have revealed.
To ensure a more sustainable revenue profile in the 2015 budget, the ministry last April announced that all local and foreign private jet owners in the country would now pay a yearly surcharge of N3, 200 per kilogramme on the weight of each aircraft.
It also said that in view of increasing foreign travels by Nigerians, all first class and business class tickets to overseas’ destinations would attract a flat rate of N15, 000 each as surcharge.
The ministry explained that the new measures were to tackle the huge revenue gap created by the slump in crude oil prices as well as the decline in production.
Business class and first class passengers , called premium passengers in travel parlance, pay far higher fares than their counterparts in the economy cabin.
For instance ,on the Lagos-London route, while economy class tickets currently cost between N220, 000 and N250, 000 as summer approaches, business class tickets cost between N850, 000 and N1.2 million, while first class tickets are sold for between N2.5 million and N3.5 million, depending on the airline.
The difference in fares is determined by the level of comfort in each cabin as well as services rendered by cabin crews.
According to calculations by our correspondent, all the private jet owners in the country will pay an approximate total of N7.9 billion yearly as luxury tax, while overseas passengers travelling in first class and business class cabins will pay about N30 billion as foreign travel surcharge; these add up to N37.9 billion as taxes from the air travel sub-sector.
Figures from the Nigerian Civil Aviation Authority(NCAA) show that there are over 190 local and foreign-registered private jets in the country at present.
Some of the common brands and models of the private jets are Bombardier Challenger 604 and 605; Global Express, Global 6000; Hawker Siddley 125 and 900; Gulfstream 450, 550 and 650; Embraer Legacy, Fenum and Citation.
The maximum take-off weight of the common brands and models ranges from 8,000kg to over 17,000kg.
Taking an average maximum take-off weight of 13,000kg per jet and using the N3, 200 surcharge announced by the Ministry of Finance, the Federal Government is expected to generate N41.6 million yearly from each private jet owner.
If this is multiplied by the 190 private jets in the country, the government is expected to generate N7.9 billion from the sector.
Similarly, data from aviation agencies show that Arik Air, Aero Contractors and 26 foreign airlines operating in the country carry over two million business and first class passengers to destinations all over the world yearly.
Using a flat rate of N15,000 per ticket, the two million premium passengers are expected to generate N30 billion to the coffers of the Federal Government every year.
It was learnt that the Federal Inland Revenue Service (FIRS) had written to the private jet owners in the country, giving the total sum they were expected to pay on their aircraft.
A private jet owner, who spoke to The Guardian on the condition of anonymity, said the FIRS wrote to request him to pay an annual luxury tax of N44 million on his Hawker Siddley jet.
“The FIRS has also sent invoices to us (private jet owners) to effect payment immediately,” the source added.
It was also gathered that the Federal Government was putting finishing touches to the commencement of the collection of the foreign travel surcharge from the airlines.
The Director, Communications and Liaison Department, FIRS, Mr. Emmanuel Obeta, could not immediately respond to questions on how much the government was expected to generate from the luxury tax and foreign travel surcharge.
The Ministry of Finance, however, confirmed in a statement that the FIRS had commenced the process of collection of the taxes and had served assessment notices on the private jet owners in the country, adding that discussions were ongoing with them to ensure a successful implementation of the initiative.
A published report by Forbes magazine said that in the last five years, wealthy Nigerians had spent over $6.5 billion acquiring new private jets, which made it the continent’s biggest market for private planes.