Getting National Assembly’s approval is a step in the right direction

Faced with the country’s increasing socio-economic challenges, the Federal Government needs all the money it can get to deal with the situation, and cannot afford to continue losing substantial tax revenue through waivers.

Senator Yahaya Abubakar Abdullahi (PDP, Kebbi North), the sponsor of a bill to amend the Federal Inland Revenue Service (FIRS) Act, gave an insight into the losses due to tax waivers. He said during the debate on the bill in the Senate: “In early 2020, the FIRS reported a loss of N1.3 trillion to tax waivers, in five years. And this was in just three sectors of the economy. Similarly, in October 2021, losses were put at $2.9 billion yearly, in tax waivers to multinationals.”

He also observed that “there are several other similar cases; and all this is happening in the face of increasing government difficulties to fund its various development projects and welfare commitments across the country.”

It is difficult to fault the rationale for the bill which, after the second reading, was sent to the Senate Committee on Trade and Investment for further input.

The proposed law seeks to regulate the processes of granting corporate tax holidays, import duty waivers and investment incentives to investors and businesses in Nigeria. Consequently, it would reduce the power of the executive branch of the government to unilaterally grant tax holidays and incentives to businesses.

Under a proposed new Section (9) in the FIRS Act, the agency will require approval of the National Assembly in granting of new or renewal of corporate tax incentives and waivers for purposes of transparency, efficiency, effective monitoring and fair play.

In addition, requests and applications for legislative approval “shall stipulate clear conditions and justification for granting tax waivers and investment incentives.” Also, any other related law that conflicts with the provision of the proposed act, shall be deemed, not applicable.

Essentially, the move aims to check possible abuse of power regarding such waivers and concessions, especially by officials in the executive arm of the government. There are allegations that the processes are characterised by favouritism, subjectivity and corruption.

Indeed, the Senate President, Ahmad Lawan, in October, during the 2023 budget presentation, had advised the President Muhammadu Buhari administration to “review the waivers and concessions government has granted to the tune of six trillion Naira,” adding that “in a difficult time like this, some of the waivers may no longer be justified.” Figures from the Debt Management Office (DMO) on dwindling government revenue underline the necessity for such a review. In 2020, targeted revenue was N5.4 trillion but actual revenue was N3.9 trillion. In 2021, the target was N6.4 trillion but N4.64 trillion was received. This year, targeted revenue was N5.82 trillion but the government got N3.66 trillion.

There is a critical need for increased revenue, and reviewing tax administration may well be part of the solution. Leakages and loopholes in tax collection and remittances to the government along with revenue shortfall and high debt profile have not helped matters. Senator Abdullahi said “even while the government explores other means of increasing its revenue streams and improving collecting capacity, the National Assembly must act with firmness and determination to ensure that we initiate and pass laws that regulate revenue streams collection and remittance.”

However, passing laws is not enough. It is important to stress that new laws will not necessarily produce the desired increase in revenue if they are poorly implemented. In particular, the review of waivers and concessions, and the replacement of the old system must be guided by a sense of propriety. In addition, the authorities must ensure that the old dysfunction is not replaced with a new one.