A member of the Monetary Policy Committee, Mike Obadan, has said Nigeria’s tax credit schemes are unsustainable.
In a statement made by him at the last Monetary Policy Committee meeting, which was released by the Central Bank of Nigeria, he called on the government to revisit its financing methods for capital projects.
He said, “Importantly, the government needs to revisit its mode of financing capital projects, in particular, infrastructure. The present financing method entailing borrowing, and tax credit schemes are unsustainable.
“The Tax Credit Scheme involves loss of tax revenue to the government. Therefore, the Federal Government should develop the will to cede key infrastructure financing to the Infrastructure Corporation of Nigeria.
“This will benefit the government as it does not entail the loss of tax revenue; the projects are developed and the country/citizens benefit. Patronising INFRACO will provide room to expand the fiscal space for priority pro-poor spending. The most vulnerable in society deserve fiscal support to cope with the soaring food and energy prices while in other areas, fiscal consolidation is inevitable in support of monetary policy to control inflation and also reduce debt accumulation.”
Meanwhile, earlier this year, the former Minister of Works and Housing, Babatunde Fashola, explained that the tax credit scheme is a new model that encourages partnerships with private companies, where taxes are paid in advance to enable the government to invest in notable projects that would be beneficial to its citizens.
The PUNCH earlier reported that the Federal Government had to forgo N16.76tn in revenue for tax reliefs and concessions given to large companies between 2019 and 2021.
As of the end of 2021, 46 companies had benefitted from various tax incentives and duty waiver schemes, while the requests of 186 companies were still pending.
They were beneficiaries of the pioneer status tax relief under the Industrial Development Income Tax Act with tax reliefs for three years.
These were contained in the tax expenditure statement reports in the Medium-Term Expenditure and Fiscal Strategy documents posted on the website of the Budget Office of the Federation.
The TES deals with revenue forgone on Company Income Tax, Value Added Tax, Petroleum Production Tax, and Customs duty.
The PUNCH also reported that the Federal Government budgeted N5.51tn for tax expenditures in 2023.
This was according to the 2023 fiscal framework document obtained by our correspondent.
According to the Tax Foundation, tax expenditures are a departure from the “normal” tax code that lowers the tax burden of individuals or businesses through an exemption, deduction, credit, or preferential rate.