Although not all tax incentives are bad, but the approach to granting such incentive is important because some are not transparently handled- TUNDE AREMO
Nigerians have reacted to the review of the five-year tax incentive enjoyed by Dangote group to ten years by the Nigerian government for the rehabilitation of some roads in the country.The Minister of Power, Works and Housing, Babatunde Fashola, had announced the government’s decision while speaking at the Businessday Road Construction Summit, held in Victoria Island, Lagos, last week.
Mr. Fashola revealed that the government had reviewed the five-year limit on tax order enjoyed by the group to a 10-year period to sustain private investment in road infrastructure, because it is a long-term asset. The minister also announced that construction of the Apapa to Oworonshoki end of the Lagos-Ibadan expressway has been handled by the group.
But speaking from an interview held from source, Policy Advocacy and Campaigns Manager at Action-Aid, a non-governmental organisation, Tunde Aremo said ,although not all tax incentives are bad, but the approach to granting such incentive is important because some are not transparently handled.A critical question that needs to be asked is what was done with the earlier incentives granted. Has there been an audit of the delivery on the existing or previous tax breaks given? Has the company granted the incentives delivered on the condition for the grant?tunde asked. he also expressed in his statement that, reservations for the granting of incentives and waivers beyond three years, such decision is counterproductive and illegal.This contradict the existing law which is unjust and not fair.
An executive director, Civil Society Legislative Advocacy Centre (CSLAC), Musa Rafsanjan said tax waivers given without due process could lead to loss of revenue for the nation.”First and foremost,we have concern in the manner in which tax waivers have been given to private companies in Nigeria particularly also some of the corporations because where you give out tax waivers, it is supposed to be an incentive to complement .these are supposed to be collected for the development of the country.“If the government uses its political power to give waivers to companies without following due process, it can be tantamount to a lot of abuse,” he explained.
Mr. Rafsanjani argued that tax waivers have always been subjected to abuse in Nigeria, these has done a lot of damage to the nation’s economy.The revenue generated for Nigeria was very poor because of the compromise by some of the government officials who gave tax waivers to so many companies which they allegedly were part of. So, what they did in the past was to bring in companies that they were part of or have interest in and give waivers.“MTN also enjoyed huge waiver from the Nigerian government which was not actually done transparently,” he added.
commenting on the Dangote incentive, he called for proper monitoring of the process in a transparent system that would involve civil society organisations working in the area of tax. “On the case of this new agreement with Dangote, first of all we would have appreciated if there was proper monitoring mechanism to ensure that what Dangote company would do for the (road) development would cover the tax (waiver) that company is supposed to be given; to ensure it’s actually properly monitored and measured. The government official may not pursue compliance with some of these agreements.
Corresponding, Head of Tax and Corporate Advisory Services at PwC Nigeria, Taiwo Oloyede said, the decision was a good one given the inability of government to handle certain projects efficiently. He, however, added that whether the decision to grant tax waiver to Dangote group was good for the nation or not would depend on details of the agreement.What you see in the public space may not exactly tell the entire story. Government, for example, is highly and largely inefficient. So if government was going to construct the road for example, it would need more money than it should and the quality of the road is not good. So if the arrangement is just that, instead of paying up tax of, say, N5 billion, use the money to construct the road, definitely the private sector would do a better job, in terms of quality and efficiency. To that extent I will say it is fine.”
Meanwhile, he Nigerian government is awaiting the design of the 35 km stretch excluding the about 7 km portion that has been completed by the previous administration around Mile 2 area.
Mr. Fashola, commenting on the plan, said the design will determine the scope of work on the road. “From the design, we will determine the cost and the scope of works which we hope can be executed quickly.”