- Seen as damaging to tourism, business and labour mobility
Air passenger taxes in Nigeria are amongst the highest in the world, according to a new study by UHY, the international accountancy network.
Nigeria imposes a levy of US$20 on both short haul flights and long haul flights leaving the country through the Nigerian airport tax. This is just below the global average of US$23 on a short haul flight and US$53 on a long haul flight, which excludes many countries that do not tax flying at all.
UHY explains that these additional costs damage tourism, penalise SMEs trying to expand overseas, disadvantage remote regional cities, and chip away at labour mobility. Although taxes on flying are often billed as ‘green taxes’ UHY points out that globally it is exceptionally rare for the revenue they raise to be ring-fenced for environmental protection projects.
UHY looked at taxes and compulsory government charges imposed per passenger on an economy class flight by 21 governments around the world. It also analysed additional charges imposed on a per passenger basis by airport operators.
UHY says that the most expensive taxes are for long haul flights departing from a Russian airport, where unlike many other countries, airline tickets are subject to sales taxes. The highest taxes of any G7 economy are in the USA, which imposes US$23 worth of taxes on a short haul.
Within the EU, the UK still has the highest flight taxes: an adult with an economy short haul ticket flying from a UK airport will pay US$20 in tax. For a first or business class ticket, the amount of tax paid would be even higher at US$41.
Many smaller European countries do not impose any taxes on individual passengers, including Ireland, Slovakia and Belgium. In many cases there has been intense lobbying by local airports and business groups to keep taxes on flying to a minimum to prevent travellers using airports in neighbouring countries with lower taxes.
Anthony Uwadiae, a Tax Partner of UHY Maaji & Co, a member of UHY said “Airlines provide a crucial piece of infrastructure. They facilitate a great deal of economic activity that is essential for countries that want to benefit from globalisation. The higher taxes on flying in Nigeria hurt airlines, business users and consumers.
“High air taxes can be harmful to businesses, as in many commercial relationships there is simply no substitute for face to face contact.”
“For smaller businesses, the cost of flying to see customers may be a serious consideration in deciding whether not to expand into new markets, especially overseas – it can lock them out of globalisation. High taxes on flying on also help perpetuate the disadvantages faced by more remote regional cities in Nigeria.”
UHY adds that in the BRIC economies, flight taxes are actually higher than the global average, at an average US$21 for a short haul flight. Long distances between cities and relatively weak road infrastructure in these countries make the alternatives to flying significantly less attractive, especially for business trips, so flights are a tempting target for taxes.
UHY explains that this approach imposes greater disadvantages on more isolated regional cities because they may become too expensive as a destination or location for a business. It notes that Russia, Canada, the USA and Australia – all geographically large countries – have four of the five highest taxes on flying in the study.
Airport and airline charges lack transparency
UHY adds that on top of taxes and compulsory payments imposed by government bodies, additional airport fees levied on individual passengers for a short haul flight amount to a typical US$23 around the world.
Although airport fees are usually passed on to the consumer, airlines often complain that the charges amount to an abuse of an airport’s monopoly status if it has a particularly favoured geographic location near a major city.
Airlines also add their own charges such as ‘fuel charges’ which many consumer groups argue should simply be included in the cost of the flight.
Gabriel Idahosa, Managing Partner, UHY Maaji: “For consumers, taxes and fees are confusing; they mean the final ticket price is usually a shock. They also add to the headache of working out how much extra a flight booked using air miles will actually cost, as well as what can be reclaimed if a customer has to cancel their ticket.”
“A major European study five years ago recommended that all air fares should state simply the basic air fare, airport charges and government taxes which are levied per passenger, and the total price. The study said that the costs of operating the flight, such as ticketing or fuel, need to be included in the basic air fare.”
“In Nigeria and around the world, the issue of complex charges is an area where far greater progress needs to be made to ensure better transparency and competition. Businesses and consumers would greatly benefit if regulators and tax authorities kept aviation taxes low and ensured that charges were more transparent.”
*Russia levies sales taxes on airline tickets – calculations based on actual ticket price, Moscow to Novosibirsk / Moscow to New York
**based on international flight taken by a non-national – Egyptian nationals pay lower rate on departing international flight.
***Short haul calculation based on $165 total costs – flight Detroit to Miami.
Notes for Editors
About UHY Maaji & Co
UHY Maaji has 7 offices, 8 partners and over 60 staff. UHY Maaji is a member of UHY, an international network of independent accounting and consulting firms with offices in major business centres throughout the world. Further information can be found at www.uhy-ng-maaji.com, uhy.com.
Additional information for Editors
Established in 1986 and based in London, UK, UHY is a network of independent audit, accounting, tax and consulting firms with offices in over 296 major business centres across more than 89 countries.
Our staff members, over 7,660 strong, are proud to be part of the 16th largest international accounting and consultancy network. Each member of UHY is a legally separate and independent firm. For further information on UHY please go to www.uhy.com.
UHY is a full member of the Forum of Firms, an association of international networks of accounting firms. For additional information on the Forum of Firms, visit www.forumoffirms.org
UHY is an international association of independent accounting and consultancy firms, whose organising body is Urbach Hacker Young International Limited, a UK company. Each member of UHY is a separate and independent firm. Services to clients are provided by the UHY member firms and not by Urbach Hacker Young International Limited. Neither Urbach Hacker Young International Limited nor any member of UHY has any liability for services provided by other members.