The Senate has passed a bill for a second reading to amend the Federal Inland Revenue Service Act to regulate the processes of granting corporate tax holidays, import duty waivers and investment incentives to investors and businesses in Nigeria.
The bill was passed on Tuesday, December 6.
The bill, sponsored by Senator Yahaya Abdullahi, seeks to stop arbitrary use of the powers of the Federal government in granting tax holidays and incentives to businesses.
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It further seeks to create a new section (9) in the FIRS Act to mandate the FIRS to secure due legislative approval of the National Assembly in granting of new or renewal of corporate tax incentives and waivers.
The senator, in the proposed bill, argues, “Such requests and applications for parliamentary approval shall stipulate clear conditions and justification for granting tax waivers and investment incentives.
“All, or any other enactments specific to cases of granting investment incentives and tax waivers to businesses, institutions and individuals that conflict with the provision of this Act, shall be deemed, not applicable.”
Abdullahi said in his lead debate on the bill that it had become imperative due to leakages and loopholes in tax collection and remittances to the government amid revenue shortfalls and high debt profile.
He expressed worry that in the last five years, the country had not been able to achieve its revenue targets.
This has led the country to massive borrowing both domestically and internationally, resulting in trillions being spent on debt servicing.
Available records show that in 2021, the Federal government spent a sum of N4.22 trillion on debt servicing.
In 2022, targeted revenue was put at N5.82 trillion, while actual revenue received was N3.66 trillion.
Abdullahi, against this backdrop, expressed concern that debt servicing was consuming over 90 per cent of the government’s revenues, up from 32.7 per cent in 2015.
He said, “If this trend of relentless reliance on increasing public debt to finance the budget continues without corresponding rise in revenues, the country shall slide into distress and insolvency.
“With petroleum revenues dwindling into insignificance, we must rise to rationalise the system of tax administration by blocking loopholes and tax evasion, and ensure utmost efficiency in tax management.
“In early 2020, the FIRS reported a loss of N 1.3 trillion to tax waivers in five years. And this was in just three sectors of the economy. Similarly, in October 2021, losses were put at $2.9 billion yearly in tax waivers to multinationals.”
The ICIR recalls that the Senate Committee on Finance revealed in May 2021 that 60 government-owned enterprises failed to remit a total of N3 trillion in six years, contrary to provisions of the constitution and Fiscal Responsibility Act.
Economic watchers say this may be unconnected to the arbitrariness in issuance of tax and incentives.
The chairman of the committee, Solomon Adeola, who spoke on the developments then, noted that the breach was uncovered during the panel’s ongoing investigation of remittances by ministries, departments and agencies (MDAs).
The failure of key revenue-generating agencies to pay what they generated into the Consolidated Revenue Fund (CRF) has been a source of financial bankruptcy of the Federal government and a cause of huge borrowing, particularly from 2015 to date.
The issue has led to an overdraft lending of over N20 trillion by the Central Bank of Nigeria to the Federal government, which puts inflationary pressure on Nigeria’s currency problems.
Harrison Edeh is a journalist with the International Centre for Investigative Reporting, always determined to drive advocacy for good governance through holding public officials and businesses accountable.
