Dangote, Honeywell, others get N16 trillion tax waiver from FG

No fewer than 46 companies had benefitted from various tax incentives and duty waiver schemes while the requests of 186 companies were still pending.

The Federal Government foregone N16.76 trillion in revenue to tax reliefs and concessions given to large companies between 2019 and 2021.

These were contained in the tax expenditure statement (TES) reports in the Medium-Term Expenditure and Fiscal Strategy documents posted on the website of the Budget Office of the Federation.

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

In the TES report for 2019, it was stated that the Federal Government had forgone revenue of N4.2 trillion from two main sources, CIT and VAT.

For CIT, the estimated amount of revenue forgone was N1.1trillion while N3.1trillion was for VAT.

The TES report read, “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 N1.1trillion; 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 3.1trillion 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.”

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 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, 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-19.

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.

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

As of the end of 2021, 46 companies had benefitted from the tax incentive scheme while the requests of 186 companies were still pending.

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 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.