The Federal Government of Nigeria is set to forgo a substantial N12.384 trillion in tax waivers, concessions, and incentives over a four-year period from 2023 to 2026. The beneficiaries of these revenue losses encompass large corporations, startups, and politically exposed individuals, including diplomats.

The term “revenue forgone” refers to the amount of government revenue sacrificed due to various exemptions and concessions. These include tax holidays, import duty relief, accelerated write-offs of capital assets, tariff barriers to safeguard investments from foreign competition, industrial estates, and the freedom to transfer profits and capital, among others.

According to the Medium Term Expenditure Framework (MTEF) for 2024-2026, the Federal Government aims to achieve N2.645 trillion in tax exemptions by the end of 2023. This figure is projected to increase to N2.71 trillion in 2024, marking a year-on-year increase of 2.5 percent. The projections indicate further growth to N3.23 trillion in 2025 and N3.8 trillion in 2026.

In 2022 alone, the government granted a total of N2.61 trillion in tax waivers. A breakdown of the tax expenditures for 2022 revealed that Value Added Tax (VAT) relief accounted for the largest portion of the exemptions at N1.404 trillion, representing 53.4 percent of the total tax exemptions. Companies Income Tax (CIT) exemptions amounted to N534.81 billion, while Customs exemptions and Petroleum Profit Tax (PPT) waivers totaled N552.81 billion and N129.45 billion, respectively.

These exemptions encompassed various sectors, including imported goods with diplomatic privileges, military hardware, fuels and lubricants, hospital and surgical equipment, aircraft (including their parts and ancillary equipment), plant and machinery imported for use by companies in export processing zones, health and medical equipment, import duty, and VAT on commercial airlines.

The report outlined that these exemptions were categorized under budgetary functions related to economic growth and development, human capital development, infrastructure development, and public administration, which includes governance, security, and international relations.

Of note, oil marketing companies accounted for 35 percent of the total CIT forgone, while CIT expenditures represented 19 percent of the N2.83 trillion total companies’ income tax collection during the year. The customs exemptions for 2022 amounted to 41.2 percent of the total N1.340 trillion customs revenue and included VAT relief on imports, waivers and concessions on import duty, the ECOWAS Trade Liberalization Scheme (ETLS), surcharges, the Comprehensive Import Supervision Scheme (CISS), and other categories.

Leave a Reply

Your email address will not be published. Required fields are marked *