Finance Bill: Dangote, 7UP, 170 firms may lose N2.4tn tax waivers


At least 172 companies may not benefit from about N2.4tn tax waivers under the Pioneer Status Incentive and other tax exemptions as the Federal Government moves to phase out some tax waivers effective 2022, findings by The PUNCH have shown.

The Federal Government is phasing out the tax exemptions for mature industries with the 2022 Finance Bill, which President, Major General Muhammadu Buhari (retd.), has sent to the National Assembly.

The Minister of Finance, Budget and National Planning, Zainab Ahmed, said the bill was designed to support the implementation of the 2023 budget as the government steps up efforts to grow tax revenue.

The latest move by the government will also affect companies operating in 71 industries or sectors that are eligible for Pioneer Status Incentive. The sectors include manufacturing, solid material, pharmaceuticals, information and communication, trade, construction, waste management, electricity and gas supply, tourism, and infrastructure.

According to the second quarter PSI report released by the Nigeria Investment Promotion Commission, the 172 companies are awaiting approval to become beneficiaries of the tax incentive.

Some of the countries with pending applications included 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 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 Flour Mills Nigeria Plc.

The pioneer status is an incentive offered by the Federal Government, which exempts companies from paying income tax for a certain period. This tax exemption can be full or partial.

Offered under the Industrial Development Income Tax Act with tax reliefs for a three-year period, the incentive is generally regarded as an industrial measure aimed at stimulating investments in the economy.

The products or companies eligible for this pioneer status are those that do not already exist in the country.

The Q2 2022 report by the NIPC further disclosed that there were about 71 beneficiaries of this tax incentive, which operate in sectors that include manufacturing, solid material, pharmaceuticals, information and communication, trade, construction, waste management, electricity and gas supply, tourism, infrastructure, among others.

47 new applications

It was also disclosed that 47 new applications were made in 2022, with 21 (20 new and one extension application requests) in Q1 2022 and 26 (24 new and two extension application requests) in Q2 2022.

It was further disclosed that only 14 companies got the PSI in Q1, while in Q2, 12 companies got the tax incentive.

However, many companies may not be able to benefit as the Federal Government plans to phase out the pioneer tax incentive.

The PUNCH recently reported that the Federal Government plans to introduce more sin taxes and cut down on tax incentives in 2023 through the proposed 2022 Finance Bill.

This was according to a copy of the public presentation of the 2023 proposed budget by the Minister of Finance, Budget and National Planning, Dr Zainab Ahmed, released recently.

Addressing State House correspondents after the Federal Executive Council meeting presided over by Vice-President Yemi Osinbajo last Wednesday, the finance minister said that the 2022 finance bill would focus on five areas namely: tax equity, climate change and green growth provisions, job creation and economic growth, reforming tax incentives as well as generating revenue/ enhancing tax administration.

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.”

Ahmed said the bill, when passed into law, would amend a number of fiscal laws in Nigeria.

Over N2tn revenue

The Federal Government had initially projected that it would forgo N2.4tn in revenue to the company income tax relief between 2022 and 2024. However, the latest development means the government may stop the various tax incentives in line with the provisions of the Finance Bill.

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