Group seeks review of tax incentives to check $3billion yearly losses
ActionAid Nigeria (AAN) has urged the Federal Government to immediately review the series of tax incentives granted to companies, especially the multinationals, to stem annual revenue losses estimated at over $2.97 billion.
In Nigeria’s bid to attract foreign direct investment (FDI), it has been losing such humongous amount of money yearly to incentives like tax holidays to multinational companies.
Such an amount, almost the 50 per cent of its 2019 capital budget of N2.031 trillion if recouped, could have been deployed to boost its capital budget implementation or even help check excessive government’s external borrowing put at $27.162 billion as at June end, according to the Debt Management Office (DMO).
ActionAid Country Director, Ene Obi, during the review of existing studies and launch of the 58-page “Reports on Tax Incentives in Nigeria,” organised by the AAN and Ford Foundation, yesterday, in Abuja, urged government to provide the right environment to attract FDIs, rather than forfeiting it’s tax wealth.
Obi, represented by Director, Organizational Effectiveness AAN, Mrs. Funmilayo Oyefusi, argued that a conducive environment is more effective than tax incentives, saying that tax holidays must be within a time frame, and thereafter, companies start paying the appropriate taxes.
He said by so doing, Small and Medium Enterprises (SMES) would not be over-burdened with multiple tax payment.
The report noted that although the new National Tax Policy provides clear objectives for investment incentives, but there are no systematic, institutionalized mechanism to quantify the effectiveness of the tax incentive measures, or communicate the costs and benefits of the current system to policymakers or the public at large
The report stated: “The lack of any form of evaluation of the effectiveness of tax incentives compromises the ability of the Nigerian authorities to adequately and comprehensively assess whether the Investment Incentives will achieve the intended and stated objectives.”
It stressed the need to streamline tax incentive and restore a level-playing field for all investors in both Large Scale Enterprises (LSCs), and SMEs, and also improve the investment climate, adding that the Federal Government must also learn from the Brazilian and South African modes of granting incentives to multinationals.
It added “The current provisions that allow for tax relief of reinvested earnings and profits granted solely on the basis of a declaration of investment intent, is easily a subject of abuse by Nigerian tax payers and should be revised; general incentives in form of well-designed investment tax credits or accelerated depreciation could be applied as they encourage longer term investments and incur less revenue loss to the government.”
The report also recommended that a well-staffed Fiscal Analysis Unit (FAU), should be established at the highest level, preferably within the Ministry of Finance with its key responsibilities of monitoring tax incentives policy, and audit special provisions that deviate from standard tax treatments to determine their revenue consequences and likely economic/investment effects.
It said that the various investment agencies and their associated networks could be consolidated, as they create unintended waste and overlap.
The report stated that consolidation of the numerous agencies currently present on the Nigeria investment scene will also help avoid the inconsistent application of investment incentives, which is inevitable under the current arrangement.
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