IMF ADMONITION ON TAX WAIVERS
The regime of indiscriminate waivers and incentives is killing local initiatives
Ordinarily, there is nothing wrong with waiver which is one of the instruments used by governments all over the world to achieve specific set goals and objectives in line with their economic aspirations. However, the way and manner it is granted in Nigeria has over the years raised fundamental questions about transparency and accountability. In fact, the use of waiver has been bastardised to the extent that successive administrations in the country have turned it into an avenue for monumental graft as top government officials connive with some unscrupulous elements in the private sector to corner billions of naira into their pockets and that of cronies. The admonition by the International Monetary (IMF) that Nigeria and other sub-Saharan African countries should focus on eliminating tax exemptions and mobilise domestic revenue to reduce their fiscal deficits could not have come at a better time.
With mounting debts at a time most of the economic indices do not look good, it cannot be business as usual in Nigeria. “Mobilising domestic revenue is less detrimental to growth in countries where initial tax levels are low, whereas the cost associated with reducing expenditures is particularly high given Africa’s large development needs,” said the IMF in its latest statement on how to avoid debt crisis in sub-Saharan Africa. Yet, Nigeria and many other countries, it noted “tend to rely excessively on expenditure cuts to reduce their fiscal deficits. Although this may be warranted in some circumstances, revenue measures, like eliminating tax exemptions or digitalising filing and payment systems, should play a greater role.”
Although tax waivers are revenues not coming to government, they are sometimes necessary to provide incentives for businesses to expand, to generate jobs and grow the economy. But many studies also reveal that most waivers amount to leaving money on the table and they incentivise collusion between government officials and their cronies. The businesses benefiting from these waivers will always protest such a review and will threaten economic collapse, etc. That is also normal. But a review of the effectiveness of existing waivers (not just pioneer status) is necessary for any government that is interested in improving on the welfare of the people.
Today, no one can give a specific figure on the exact amount Nigeria has lost to the indiscriminate granting of waivers, because the practice is as rampant as it is uncoordinated since it is done at the instance of the president and ministers. In 2011, the House of Representatives revealed that not less than 183 undertakings and individuals were at the period beneficiaries of tax waivers, exemptions and concessions running into several billions of naira, money that should ordinarily accrue to the federation account. The list is today far longer. There is therefore no better time than now to plug all the loopholes of the abuse the granting of waivers has been subjected to over the years. The federal government should get serious and stop paying lip service to growing the local economy.
Some incentives may be necessary and useful, we urge the federal government to conduct a comprehensive review and run its model in a bid to eliminate many that amount to giving official seal to graft. For example, tax credit for infrastructure is a good initiative and we have seen some roads from the policy. But there have also been reports over several years that the pioneer policy is being abused. Many who do not pioneer anything can access it just by adding another line to existing factories. This is why the federal government should take the IMF admonition seriously. The regime of indiscriminate waivers, incentives and exemptions is killing local initiatives and fuelling corruption in Nigeria.
