FG plans review as tax waivers gulp N6tn annually

The Federal Government has disclosed plans to review and reduce tax waivers given to companies operating in Nigeria as total tax incentives hit N6tn annually.

The Chairman of the Presidential Tax Reform Committee, Mr Taiwo Oyedele, who made the disclosure, said carry out a comprehensive tax waiver review in line with the plan the previous administration had set.

He made the disclosure in Abuja when the Minister of Finance and Coordinating Minister for the Economy, Wale Edun, unveiled the eight-point agenda, which the Bola Tinubu-led government hopes to use in transforming the challenging economic environment.

Earlier reports had put the average annual tax waiver figure at about N5tn. Companies including Dangote Sinotrucks West Africa Limited, Lafarge Africa Plc, Honeywell Flour Mills Nigeria Plc, Jigawa Rice Limited, and Stallion Motors Limited, among others had benefited from tax waivers in form of pioneer status.

Others also include African Foundries Limited, Royal Pacific Group Limited, Kunoch Hotels Limited, Princess Medi Clinics Nigeria Limited, Medlog Logistics Limited, and Masters Liquefied Gas Limited.

The latest move by the government may affect some of these companies and others which have benefited in one form of tax waiver or the other.

The PUNCH had earlier reported that at least 172 companies might not benefit from about N2.4tn tax waivers under the Pioneer Status Incentive and other tax exemptions as the Federal Government moved to phase out some tax waivers.

Speaking at the press briefing, Oyedele said “Incentives in and of themselves are not bad. But you will also agree with me that as time changes, you need to also review what you have done for years.”

He added that Nigeria has about N6tn annual tax expenditure, which needs to be reviewed.

“When you don’t look at your incentive regime, it can get to a point when it becomes a distortion for economic growth because some people benefit and others don’t but they operate in the same sector; so, they cannot compete. You also have to think about it from the point of view of cost benefits. As a country, if we are giving away N1, we need to be able to convince ourselves that the benefit we are getting is more than N1. Otherwise, that is no longer an incentive for the economy but for some individuals.

“If you look at our tax expenditure reports over the past three to four years, on the average, we are giving away around N6tn per annum. That is significant. What we have not been measuring enough is the benefit we are getting from that. But I can confirm to you as part of the mandates given to us by Mr President is to look at the incentive regime in Nigeria so that we can based on data and evident, design what is appropriate for us as a country. In terms of what we want to drive, those incentives will be targeted, data-driven, evident-based, and in most cases, we have subset clauses so that they don’t last forever and we will only find out after losing so much money,” he added.

The tax expert further said the government plans to remove disincentives in the tax system of the country.

Oyedele said, “We think that what is more pressing and even more important than giving incentives is removing disincentives. The good thing about removing disincentives is that is doesn’t cost government money. It stimulates the economy and helps us to create wealth and growth this is inclusive.”

He noted that the country has a N20tn tax gap, which when closed with automated process, can boost government revenue.