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Ethiopian Airlines admits 15-year tax moratorium demand

Ethiopian Airlines has disclosed that it negotiated for a 15-year tax moratorium and other incentives from the Federal Government during the botched national carrier project, the Nigeria Air deal.

The airline stated this in its defence as the second defendant in the case in the suit filed by the Airline Operators of Nigeria at the Federal High Court in Lagos.

The 37-page document with suit number FHC/L/CS/2159/2022 was sworn to by the Country Manager of Ethiopian Airlines in Nigeria, Mr Wondwossen Beyene.

The airline filed the defence on December 19, 2022, less than a month before the commencement of the initial suit filed by the AON.

The case is scheduled to come up at the Federal High Court in Lagos on January 16, 2023. Ethiopian Airlines declared its bid for the purchase of shares in the national carrier, like other Nigerian shareholders.

The document read in part, “I believe as fact that the averments contained in paragraph 11B of the affidavit in support of the plaintiff’s originating summons are a distortion of the truth. The 2nd defendant did request tax incentives/concessions for the proposed fledging Nigerian airline, amongst other incentives, which is a normal international practice in international investment negotiations, and not against the law.

“In any case, those requests were proposals and proposed during negotiations with the government and which the Federal Government was at liberty to accept or refuse. The plaintiffs have not shown any proof that the 2nd defendant obtained any tax incentives/concessions for the Federal Government of Nigeria.”

“Ethiopian Airline’s position: The company also disagreed with the AON that its involvement in the national carrier project would take away jobs for qualified Nigerians. Rather, the airline insisted that its investment in the project would boost the Nigerian economy, ensures growth in the sector, and create employment and succour for Nigerian travellers.

Ethiopian Airlines, however, in its defence, said that it was not aware the Nigeria Air project was under a Public Private Partnership scheme, insisting it was absolute.

According to the airline, AON, which sued it and other defendants, did not participate in the process. It, therefore, wondered why AON challenged its emergence when it refused to bid for the project.

The carrier argued that the Federal Government had agreed to sell 95 per cent of the shares, retaining only 5 per cent.

The FG had also invited 46 per cent of Nigerian investors, while the other 49 per cent was ceded to an international airline.

The PUNCH had reported that the AON and five others in the aviation industry in their suit against the defendants, Nigeria Air Limited, Ethiopian Airlines, Senator Hadi Sirika (Minister of Aviation, Federal Ministry of Aviation) and the Attorney-General of the Federation stated that Ethiopian Airlines in its Commercial and Strategic Plan with the Federal Government on the new national carrier, requested 15 years tax moratorium from the Nigerian Government.

The document, in its Taxation Assumption on page 43, stated that no formal analysis had been carried out on the airline’s tax position, saying that for this document, it assumed that there were no withholding taxes on interest payments, insurance premiums and dividends to shareholders.

“However, it is assumed that since this is an investment of strategic nature, the government of Nigeria will provide utmost support for the realisation of this project, including tax holidays for the airline during the formation period and initial years of operation, estimated to cover at least 15 years period.

“Tax-related matters will be dealt with in detail during the final negotiations and conclusion of the shareholders’ agreement and the management contracts.”

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