President Muhammadu Buhari’s administration has reportedly waived the sum of N16.76tn in revenue to tax reliefs and concessions given to large companies between 2019 and 2021.
The beneficiaries of the tax reliefs and concessions included Dangote, Lafarge, Honeywell and 43 other major beneficiaries.
At least 46 companies had benefitted from various tax incentives and duty waiver schemes as of the end of 2021, while the requests of 186 companies were still pending, The PUNCH reports.
In the TES report, Federal Government had forgone revenue of N4.2tn in 2019 from two main sources, CIT and VAT.
The estimated amount of revenue forgone for CIT was N1.1tn while N3.1tn was for VAT.
“The most significant conclusion is the large size of Nigeria’s revenue forgone from just two of the main taxes, i.e., CIT and VAT. Nigeria’s non-oil revenue potential is at least twice its current collections.
The preliminary estimate of revenue forgone from CIT incentives and concessions in 2019 is N1.1tn; for contrast, 2019 CIT collections was N1.6tn. The preliminary estimate of revenue forgone from VAT policy choices and compliance gaps is estimated to be NGN 3.1tn and could possibly be more. It is worth reiterating that revenue forgone from Customs Duty, Excises, Petroleum Production Tax, Personal Income Tax and concessions under the Oil and Gas Zones legislation is still to be computed,” The TES report read.
According to the TES report, the figure for revenue foregone would likely exceed N4.2tn if there were sufficient data, especially from Customs Duty, Excises, PPT, Personal Income Tax and concessions under the Oil and Gas Zones legislation.
The report also said by 2020, the figure rose to N5.8tn, with the majority of it coming from revenue forgone under VAT. A breakdown showed that N4.3tn was forgone under VAT; N457bn under CIT; N307bn under PPT, and N780bn under customs duty.
It was discovered that five countries accounted for about 86 per cent of total customs relief, with China accounting for nearly two-thirds of total relief granted. Netherlands, Togo, Benin and India were the other top sources of supplies benefitting from the reliefs.
In 2021, the total figure continued to rise, hitting N6.79tn, with revenue foregone on VAT accounting for most of it. A breakdown showed that N3.87tn was forgone under VAT, N548.40bn under CIT; N337.70bn under PPT; N1.84tn under customs duty; and N111.15bn under imports VAT.
The Nigerian government had to forgo a total of N16.79tn in tax reliefs for the three-year period, Customs duty waivers and concessions, according to an analysis by The PUNCH.
Under this figure, tax exemptions covered imported goods covered by diplomatic privileges, military hardware, fuels and lubricants, hospital and surgical equipment, aircraft (their parts and ancillary equipment), plant and machinery imported for use by companies in export processing zones, health and medical supplies to abate the spread of COVID.
Other exemptions were said to be included reliefs on the presidential initiative on COVID-19 supplies, Import Duty and VAT on commercial airlines.
It was also noted that five countries accounted for about 92 per cent of total Customs relief with China accounting for nearly half of the total relief granted. Singapore, Netherlands, Togo, Benin Republic and India were the other top sources of supplies benefitting from the reliefs.
They were beneficiaries of the pioneer status tax relief under the Industrial Development Income Tax Act with tax reliefs for a three-year period.
This was contained in the Q4 2021 PSI report released by the Nigeria Investment Promotion Commission.
The pioneer status is an incentive offered by the Federal Government, which exempts companies from paying income tax for a certain period. This tax exemption can be full or partial.
The incentive is generally regarded as an industrial measure aimed at stimulating investments in the economy.
The products or companies eligible for this pioneer status were said to be those that do not already exist in the country.
These companies are Dangote Sinotrucks West Africa Limited, Lafarge Africa Plc, Honeywell Flour Mills Nigeria Plc, Jigawa Rice Limited, and Stallion Motors Limited.
Others are African Foundries Limited, Royal Pacific Group Limited, Kunoch Hotels Limited, Princess Medi Clinics Nigeria Limited, Medlog Logistics Limited, and Masters Liquefied Gas Limited.
Whereas, Nigeria’s budgetary situation is dire, as seen by low tax receipts. According to the Federal Inland Revenue Service, the country generated N6.4tn in taxes in 2021. This amounts to approximately $15.433 billion.
(Punch)
