Reps probe alleged abuse of tax incentives by public institutions, others

From Ndubuisi Orji, Abuja

The House of Representatives has resolved to investigate alleged abuse of tax incentives, tax breaks and waivers by public institutions saddled with the responsibility of granting them and the benefiting companies.

Consequently, the House mandated its Committees on Industry, Finance and Commerce to undertake the probe and  report back within four  weeks for further legislative actions.

This followed the adoption of a motion by Oluwole Oke, calling for a probe of “allegations of abuse of tax incentives, tax breaks and tax waivers by public institutions granting the same  and the benefiting  companies.”

Oke, in the motion, informed the House that available data indicates that the country loses about N8 trillion annually to tax incentives and waivers. According to him, about N6 billion of this sum was lost to abuse of the incentives, while the other N2 trillion “worth of waiver achieves the objective of the Federal Government.”

The lawmaker explained that,  “some of the tools available to monetary and fiscal policy authorities to tinker with the economy and stimulate economic activities in some sectors of the economy are tax waivers, tax breaks, tax exemptions and tax incentives.

“Hence, when the government needs to attract investments and activities in a sector of the economy, it grants incentives in that sector.”

He recalled that historically, the Federal Government had issued policy documents in line with its fiscal goals and strategy, for example, the annual issuance for the Fiscal Policy Measures by the Ministry of Finance, the periodic issuance of the Value Added Tax Modification Order and others. Some of these policy interventions had been effective in the past in achieving parts of its objectives. “

Oke argued that while the government has good intentions, the abuse of the incentives has led to revenue losses for the government.

“These losses are occasioned and driven primarily by abuses by companies that have been granted tax based waivers and incentives. Based on available data, Nigeria continues to lose about N8 trillion annually to tax incentives and waivers.

“About N6 trillion is lost to companies that abuse the system, while N2 trillion worth of waiver achieves the objective of the Federal Government. Most of the abuses arise from fiscal items like capital allowances, investment allowances, pioneer status incentives, free trade zone exemptions and value added tax exemptions, among others.

“These gaps have negatively affected Nigeria’s Tax to GDP ratio, which stands at 10.6 percent, being one of the lowest in Africa. The gap created in the revenue profile of the Government of the Federation has also contributed to the Federal Government seeking loans, grants and aides to fund our budget deficit.

“If urgent steps are not taken to investigate these situations, Nigeria may not only be hanging on a fiscal cliff, it may fall off the cliff and be heading to Venezuela, which is a situation, where a country has huge resources but is in deep economic crisis, recession and depression,” he stated.