The Nigerian Government has announced plans to review the existing tax incentives given to companies.
READ ALSO: Nigerian government approves tax reliefs, other incentives for startups
Chairman, Presidential Fiscal Policy and Tax Reforms Committee, Taiwo Oyedele, who disclosed this revealed that about N6 trillion is given out annually as tax incentives adopted by past governments, which did not yield the desired benefits for the country.
“When you don’t look at your incentives regime, it can get to a point where it becomes a distortion for economic growth, because some people benefit while others don’t and 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.
“So I can confirm to you as part of the mandate given to us by the President, is to look at incentives regime in Nigeria.
“So we can base on data and evidence, design what is appropriate for us as a country in terms of what we want to drive, so those incentives will be targeted,” he said.
Mr Oyedele said that this administration was focusing on driving an effective fiscal governance, revenue transformation beyond taxes.
He said that they target 18 per cent tax to GDP ratio over the next three years, while ensuring reduction in the number of taxes payable by Nigerians.
“So that appears like a contradiction, how do you remove taxes and collect more, but it’s easy to explain, because we know where the gaps are, the estimated tax gap which is what you should collect today, if people should pay the right amount of taxes is in the region of N20 trillion.
“So to close that gap, we will rely on automation and the efficiency of collection including harmonisation of how those taxes are collected.
“The other thing is, if you also consider the incentive rationalisation maybe it’s not N6 trillion we should be giving away maybe it’s N2 trillion which must be targeted at people that need them the most.
“And the one that is even more interesting is the plan to increase tax revenue by growing the economy, so if you allow people to be prosperous and businesses to thrive, then you make money from revenue naturally,” Mr Oyedele said.
He said that efforts were ongoing to facilitate economic growth and inclusive development by addressing notable impediments to doing business in Nigeria.
