FG: Nigeria’s Opaque Tax Waiver Regime Gulped N18tn in 3  Years

Emmanuel Addeh in Abuja

The federal government yesterday said the mostly opaque tax waiver regime in the country gulped N18 trillion in the last three years, without a transparent mechanism to measure the benefits.

The Chairman, Presidential Committee on Fiscal Policy and Tax Reforms, Taiwo Oyedele, who spoke on Channels TV, maintained that Nigeria had over the years failed the prudency test in granting tax waivers.

While admitting that every country has some form of waivers for certain reasons, he argued that the manner Nigeria administers its own needs to be questioned.

He said: “Essentially, every country gives one form of waiver, incentive or the other. So in principle, there’s nothing wrong with granting waivers but the way we have done this over the years, essentially means that we haven’t been as prudent and transparent about the waivers we granted.”

Oyedele argued that the manner Nigeria has carried out its own tax waivers has been selective and only favoured those who have access to government.

“In some cases, it’s been based on those who have contacts and access. While some are benefiting, you find someone who is doing business in the same industry does not have access to it.

“What that means is not only were we wasting taxpayers’ money on those incentives, we created economic distortion that wasn’t good for the operation of the market, and by extension, not helpful for the economy,” he said.

The former senior PwC official stated that the committee was working through the process and will in due course, streamline who needs waivers and who don’t in such a way that it benefits Nigeria rather than some select few.

“We’re working through that process as we speak to rationalise it so that every naira that we give away is properly designed in terms of the targets. That there’s cost-benefit analysis and that every N1 given away is quantified and measured,” he added.

Stressing that annually the tax waiver in Nigeria is about the same amount Nigeria generates in revenue, he lamented that aside the waivers on Value Added Tax (VAT) which might have some social impact, the rest is largely a waste.

 “This is really the part that makes it painful because it would then appear like you just wasted the money you didn’t even have in the first place, and those numbers are huge compared to our revenue base.

“If we were a country where we were making N60 trillion to N70 trillion and we gave away N6 trillion we would say we can live with it. But the revenue generated by the Federal Inland Revenue (FIRS) in 2021 was just barely N6 trillion. And then you give that amount away in tax waivers and incentives,” he lamented.

He argued however, that the exemptions from VAT on essentials, including basic food items and medical expenses were necessary.

“Like now, I’ve requested that the government suspends VAT on diesel for very obvious reasons as well as suspend VAT on import duties on Compressed Natural Gas (CNG). There are things you have to do per time because, at the end of the day, governance is about the people,” he said.

He also raised concerns over the Free Trade Zones, where people could operate physically within Nigeria, but by law, assume that they are not within Nigeria, thereby enjoying all manner of waivers from duties from VAT and income tax.

Oyedele said that the committee was building “sunset provisions” into the incentives, so that they would have a timeline without continuing to bleed the country.

 “It could also be maybe another five or 10 years. But whatever it is, we will be using data and engagement with stakeholders to decide and design and put those subset clauses in the law,” he said.

While providing an update on the progress of the implementation of the tax policy reform recommendations, he said the quick passage of the emergency economic intervention bill would go a long way to fast-track the process.

“So we’re expecting in the next few days, we should have a bill that’s ready to go to the national assembly,” he assured.