Revisit tax waivers for the common good
THE granting of tax waivers to selected businesses in certain sectors of the economy has come under some close scrutiny by many Nigerians. There have been questions as to whether these waivers are in the overall interest of the economy. Do the waivers benefit only a few privileged businesses or is it persons, particularly those who are close to those in the corridors of power? Do the businesses enjoying these waivers and concessions transfer the benefits to the public in terms of better services, employment or lower factory- gate prices? These are questions begging for answers.
The National Assembly recently joined in this chorus when its Joint Committee on appropriation called on the Federal Government to stop tax waivers and concessions already granted to corporate entities. The logic behind this is that the government is losing huge revenue to tax waivers and incentives; and that all companies should pay their taxes in full to the government coffers and then request a rebate. This is quite understandable given the sorry state the economy is currently in with all the macroeconomic indicators moving southwards especially the level of government revenue which is quite low relative to the level of budgeted expenditure in the 2024 federal budget.
According to Mr. Taiwo Oyedele, the chairman of the Presidential Fiscal Policy and Tax Reforms Committee, the country incurred losses of up to N6 trillion in tax waivers yearly and the levels of government have failed to measure the impact of tax waivers on the economy. The core issue here is the proper assessment of the net benefit of these waivers, if any, to the development of the Nigerian economy. If there is no clearly discernible benefit of the waivers to the system, then they are not worth it. In that case, it would just be a case of enhancing the welfare of the “big boys”, the big corporate giants, who may, more often than not, pocket the benefits of the government waivers and incentives than pass them on to the economy.
A school of thought is that President Bola Tinubu should make a bold pronouncement to end the granting of tax waivers to these big businesses similar to how he handled the fuel subsidy issue. His pronouncement of “fuel subsidy is gone” on May 29, 2023 did indeed reverberate through the entire economic landscape of the country with huge consequences for the ordinary man. While the jury is not yet out on the appropriateness of the sudden announcement of the “fuel subsidy is gone” pronouncement, the logic being put forward by this school of thought is that the same political will exhibited by Mr. President on May 29, 2023 should be replicated in the tax waiver issue by abolishing the tax waivers and making a pronouncement that the “tax waivers is gone”. It is largely believed that the major benefits of the waivers are still shrouded in mysteries. It is generally believed that some people are taking unnecessary advantage of the public and thus benefiting from these waivers, to the detriment of ordinary Nigerians. There have been reported cases of illegalities in these incentives which should be removed so that the economy can experience some lease of life with more revenue made available for the government to run the economy successfully.
There are a number of things that can be done in this regard to address this issue. One way forward may be the situation where the tax waivers to these big companies are reduced by half or by other proportions. This would give the government the time to evaluate any changes in revenue or development in the affected sectors to determine whether further waivers should be removed or there should be a return to the status quo. The other option could be that first and foremost, affected companies should pay all taxes after which consideration of waivers can be made on a case by case basis. This would be based on application of rebates by prospective companies, at the discretion of the government. This is the position of the Chairman of the National Assembly Joint Committee on Appropriation which may need to be looked into by the Tinubu administration. The input of the Oyedele Presidential Fiscal Policy and Tax Reforms Committee would also be necessary on the issue. It can be noted that some of these waivers being granted are often shrouded in secrecy with government officials colluding with these corporate bodies in a sort of “rub my back, I rub your back” setting.
A critical question to ask here however is whether the National Assembly is actually serious in their quest to remove the waivers to the big corporations. Or are they interested parties in the whole economic chess game? Nigeria needs to address the corruption in this issue of tax waiver, incentives and concessions granted to big companies. The normal expectation is that the ordinary man should be the ultimate beneficiary in the entire scheme. But experience has shown that this is not so. The benefits are, more often than not, warehoused by the companies and the government officials who may include members of the National Assembly. The Tinubu administration should muster the appropriate political will to fully and finally address this issue giving due consideration to its benefit to the ordinary Nigerians and to the national economy as a whole.