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Nigeria grants N16.7 trln in tax reliefs, concessions to 46 firms in 3-year ~Reports

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Nigeria has in the period of three years granted a total of N16.76 trillion in revenue to tax reliefs and concessions to large companies, details contained in the country’s tax expenditure statement (TES) reports have revealed.

In a report by the Punch, showed that by the end of 2021, 46 companies had benefitted from various tax incentives and duty waiver schemes while the requests of 186 companies were still pending.

The period runs between 2019 and 2021, as stated in the TES reports in the Medium-Term Expenditure and Fiscal Strategy documents posted on the website of the Budget Office of the Federation.

The TES deals with revenue forgone on Company Income Tax, Value Added Tax, Petroleum Production Tax, and Customs Duty.

The beneficiaries of the tax reliefs and concessions included Dangote Group, Lafarge Africa, Honeywell Group and 43 other major beneficiaries.

They were beneficiaries of the pioneer status tax relief under the Industrial Development Income Tax Act with tax reliefs for a three-year period.

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 are those that do not already exist in the country.

These companies included: Dangote Sinotrucks West Africa Limited, Lafarge Africa Plc, Honeywell Flour Mills Nigeria Plc, Jigawa Rice Limited, and Stallion Motors Limited.

In 2019, the report stated that the government had forgone revenue of N4.2 trillion from two main sources, CIT and VAT to 46 companies.

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For CIT alone, the government has forgone a total revenue of N1.1 trillion and N3.1 trillion in VAT revenue that it would have collected to the companies.

“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 N1.1 trillion while actually collection from companies income tax stood at N1.6 trillion.

“The preliminary estimate of revenue forgone from VAT policy choices and compliance gaps is estimated to be NGN 3.1 trillion 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 reports stated.

According to the TES report, the figure for revenue foregone would likely exceed N4.2 trillion if there were sufficient data, especially from Customs Duty, Excises, PPT, Personal Income Tax and concessions under the Oil and Gas Zones legislation.

By 2020, the figure rose to N5.8 trillion, with the majority of it coming from revenue forgone under VAT. A breakdown showed that N4.3 trillion was forgone under VAT; N457 billion under CIT; N307 billion under PPT, and N780 billion under customs duty.

It was also noted 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.

The total figure continued to rise in 2021, hitting N6.79 trillion, with revenue foregone on VAT accounting for most of it. A breakdown showed that N3.87 trillion was forgone under VAT, N548.40 billion under CIT; N337.70 billion under PPT; N1.84 trillion under customs duty; and N111.15 billion under imports VAT.

For the three-year period, therefore, the Federal Government had to forgo a total of N16.79 trillion in tax reliefs, Customs duty waivers and concessions.

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 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.

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