The Federal Government of Nigeria is set to waive tax revenues amounting to N12.4 trillion over the course of four years (2023-2026). These tax exemptions, concessions, and incentives will benefit a range of entities including large corporations, startups, and politically exposed individuals, including diplomats.
Key Points:
- Scope of Revenue Forgone:
- The term “revenue forgone” refers to the revenue lost by the government due to various concessions and waivers, such as tax holidays, import duty relief, and other incentives. These are provided to support businesses and investments.
- Projected Figures:
- The government is targeting N2.645 trillion in tax exemptions by the end of 2023. This figure is expected to increase to N2.71 trillion in 2024, representing a year-on-year growth of 2.5 percent. The projections rise to N3.23 trillion in 2025 and N3.8 trillion in 2026.
- Previous Year’s Exemptions:
- In 2022 alone, the government granted a total of N2.61 trillion as tax waivers.
- Breakdown of Tax Exemptions (2022):
- Value Added Tax (VAT) relief constituted a significant portion of the exemptions at N1.404 trillion, accounting for 53.4 percent of the total. Companies Income Tax (CIT) exemption amounted to N534.81 billion. Additionally, Customs exemptions and Petroleum Profit Tax (PPT) waiver stood at N552.81 billion and N129.45 billion, respectively.
- Categories of Exemptions:
- The exemptions apply to various categories including imported goods covered by diplomatic privileges, military hardware, fuels, lubricants, hospital and surgical equipment, aircraft (parts and ancillary equipment), and machinery for companies in export processing zones, among others.
- Budgetary Functions Exempted:
- Exemptions are aligned with budgetary functions related to economic growth and development, human capital development, infrastructure development, and public administration encompassing governance, security, and international relations.
- Significant Contributors to CIT Forgone (2022):
- Oil marketing companies represented 35 percent (N187.2 billion) of the total Companies Income Tax (CIT) forgone. The CIT expenditures accounted for 19 percent of the total companies’ income tax collection during the year.
- Customs Exemptions as a Percentage of Revenue:
- The total customs exemptions for 2022 represented 41.2 percent of the total N1.340 trillion customs revenue.
Conclusion: The Federal Government’s decision to forgo N12.4 trillion in tax waivers and incentives over the next four years reflects a strategy to stimulate economic growth and development. These measures aim to support businesses, both large and small, as well as encourage investments in various sectors. The breakdown of exemptions provides insights into the areas where these incentives are directed.
