Federal Government Grants Tax Exemptions to 107 Companies Despite Revenue Boost Efforts

Despite the Federal Government’s efforts to discontinue tax exemptions and enhance revenue generation, findings reveal that 107 companies, including industry giants Dangote and Mikano International, are currently benefiting from tax exemptions.

These revelations are based on the latest Pioneer Status Incentive (PSI) reports released by the Nigerian Investment Promotion Commission (NIPC) and obtained by The Punch.

The report indicates a significant increase in the number of beneficiaries enjoying Pioneer Status under the Industrial Development Income Tax Act, rising from 83 in the first quarter of 2023 to 107 firms by the fourth quarter of the same year. While 79 firms had their requests newly received, 211 firms await consideration, and 56 companies had their applications approved in principle.

The pioneer status incentive, offered by the Federal Government, exempts companies from paying income tax for a specified period to stimulate investments in the economy. These tax reliefs typically last for three years and are geared towards fostering industrial growth in sectors where eligible products or companies do not already exist.

Although the report lacks specific figures on the amounts granted to the companies, data from the Federal Inland Revenue Service annual reports reveal that approximately 71 companies enjoyed N390.26 billion in pioneer status incentives between 2021 and 2022.

The beneficiaries operate across various sectors, including manufacturing, solid materials, pharmaceuticals, information and communication, trade, construction, waste management, electricity and gas supply, tourism, and infrastructure. Notable companies among the beneficiaries include Dangote Fertilizers, Mikano International Limited, and Sinotrucks West Africa Limited.

While tax incentives aim to stimulate economic growth, concerns have been raised about the significant revenue loss incurred due to waivers granted annually. The Federal Government has expressed intentions to review and reduce tax waivers granted to companies operating in Nigeria, citing an annual loss of N6 trillion in tax incentives.

Officials of the Nigerian Investment Promotion Commission defend the incentives, asserting that they are crucial for attracting foreign investments into the country. Lovina Kayode, the Head of Incentives Administration, emphasized the stringent procedures followed to ensure that only deserving companies receive tax breaks.

Looking ahead, the commission plans to publish impact reports assessing the effectiveness of the pioneer status incentive in job creation and promoting economic activities.

Economic experts stress the importance of tax waivers in driving economic growth but call for transparency and fairness in the allocation of incentives.

Dr. Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprise, asserts that tax incentives are necessary to encourage investment and pioneer businesses’ establishment, emphasizing the need for a transparent and objective process.