The Pioneer Status Incentive and other tax exemptions worth around N2.4 trillion may not be available to at least 172 companies as the federal government seeks to phase them out starting in 2022, according to research by The PUNCH.Information Guide Nigeria
With the 2022 Finance Bill that President Major General Muhammadu Buhari (ret.) forwarded to the National Assembly, the Federal Government will gradually eliminate the tax exemptions for mature sectors.
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Live, Study and Work in Canada. No Payment is Required! Hurry Now click here to Apply >> Immigrate to CanadaThe law, according to Zainab Ahmed, Minister of Finance, Budget, and National Planning, is intended to aid in the implementation of the 2023 budget as the government intensifies attempts to increase tax collection.
Companies involved in 71 sectors or industries that qualify for the Pioneer Status Incentive will also be impacted by the government’s most recent action. The industries included in this list are manufacturing, solid materials, medicines, information and communication, trade, construction, waste management, energy and gas supply, tourism, and infrastructure.
The 172 companies are awaiting clearance to get the tax incentive, according to the Nigeria Investment Promotion Commission’s release of the PSI report for the second quarter.
Applications from the following nations were still pending: Dangote Coal Mines Limited, Seven/Up Bottling Company Limited, Mikano International Limited, AA Rano Nigeria Limited, CCECC Nigeria Limited, Corinthia Villa Hotel & Suites Limited, and Red Star Oil and Gas Limited.
Others include Flour Mills Nigeria Plc, Max Air Limited, Dukia Gold & Precious Metals Refining Company Limited, Emzor Pharmaceutical Industries Limited, Segilola Resource Operating Limited, Jabi Mall Development Company Limited (extension), Johnvents Industries Limited, Jigawa Fertilizer & Agro Allied Limited, and Dukia Gold & Precious Metals Refining Company Limited.
Companies are exempt from paying income tax for a specified amount of time thanks to the federal government’s incentive program known as pioneer status. Any portion or all of this tax exemption is possible.
The incentive, which is provided under the Industrial Development Income Tax Act and includes tax exemptions for three years, is typically viewed as a business policy intended to encourage economic investment.
Only those goods or businesses that are brand new to the nation are qualified for this pioneer distinction.
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Live, Study and Work in Canada. No Payment is Required! Hurry Now click here to Apply >> Immigrate to CanadaThe NIPC’s Q2 2022 report further revealed that there were approximately 71 recipients of this tax incentive, who work in a variety of industries including manufacturing, solid materials, pharmaceuticals, information and communication, trade, construction, waste management, electricity and gas supply, tourism, and infrastructure.
47 brand-new applications
47 new applications were submitted in 2022, with 21 (20 new and one extension application request) submitted in Q1 2022 and 26 (24 new and two extension application requests) submitted in Q2.
The fact that only 14 businesses received the PSI in Q1 and 12 businesses received the tax incentive in Q2 was also revealed.
But because the federal government intends to gradually eliminate the pioneer tax advantage, many businesses might not be able to profit.
The planned 2022 Finance Bill, according to a recent story in The PUNCH, would increase the federal government’s sin taxes and reduce tax incentives starting in 2023.
According to a copy of the minister of finance, budget, and national planning, Dr. Zainab Ahmed’s recent public presentation of the planned budget for 2023, this is what happened.
The finance minister said that the 2022 finance bill would put a strong emphasis on five areas, including tax equity, climate change and green growth provisions, job creation and economic growth, reforming tax incentives, and generating revenue/improving tax administration. The minister was speaking to reporters outside State House following the Federal Executive Council meeting last Wednesday, which was presided over by Vice-President Yemi Osinbajo.
She said, “The purpose of the tax equity reforms is to combat tax evasion and aggressive tax planning practices that some companies operating in Nigeria are involved in but also enabling the utilisation of ICT tools and using international best practice to assess taxpayers tax on a fair and reasonable basis.
“The climate change green growth focus will complement non-fiscal reforms that are designed to reduce greenhouse emissions and also to facilitate domestic and international investment in climate adaptation, as well as mitigation and also to enhance green growth and create jobs.
“The third focus area, job creation, and economic growth is also designed to complement the ease of doing business and other reforms to support capital formation by the private sector as well as to foster enabling business environments for micro, small and medium enterprises for youth as well as women in businesses. It will also help to enhance the performance of businesses that are in the fintech, the ICT, entertainment, fashion, sports as well as the art space.”
“The fourth tax incentive is to phase out antiquated pioneer, and other tax incentives for mature industries and moving a revised set of incentives for real infant industries. Through economic governance reforms we have also made proposals to reduce tax expenditure, which is equivalent to foregone revenue to support fiscal space. It is also based on statistics to gradually transition away from expensive and redundant tax incentives to incentives that are rewarding performance.
“The fifth focus area is revenue generation and tax administration is to complement the ease of doing business and other reforms that enhance tax administration as well as to introduce targeted fiscal and non-fiscal reforms to amend, address and cure defects in existing tax and non-tax laws and regulations.”JAMB portal
Ahmed said the bill, when passed into law, would amend a number of fiscal laws in Nigeria.
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Over N2tn revenue
The Federal Government had previously estimated that it will forego N2.4tn in revenue from corporation income tax cuts between 2022 and 2024. However, the most recent development suggests that the government may suspend the different tax breaks in accordance with the stipulations of the Finance Bill.
The N2.4tn tax prediction was included in the Medium-Term Expenditure and Fiscal Strategy Paper 2023-2025, which is available on the Budget Office of the Federation’s website.
The Federal Government estimated that the tax waiver will cost N658.08 billion, N789.70 billion, and N947.64 billion in 2022, 2023, and 2024, respectively.
According to the PUNCH, the Federal Government lost N16.76tn in revenue due to tax breaks and concessions granted to multinational corporations between 2019 and 2021.
The TES is concerned with revenue lost from Corporation Income Tax, Value Added Tax, Petroleum Production Tax, and Customs Duty.
According to the 2019 TES report, the Federal Government lost N4.2tn in revenue from two key sources: CIT and VAT.
CIT revenue was anticipated to be N1.1tn, while VAT revenue was estimated to be N3.1tn.
The TES report read, “The most significant conclusion is the large size of Nigeria’s revenue forgone from just two of the main taxes, i.e., CIT and VAT. Nigeria’s non-oil revenue potential is at least twice its current collections.
