Aliko Dangote, Flour Mills, 170 others to lose tax waivers to infant industries

Tax relief applications by Aliko Dangote’s coal company, Flour Mills Nigeria Plc, Max Air, and about 169 other corporations are likely to be rejected by the Federal Government.

This is based on the recently released Pioneer Status Incentive (PSI) second quarter report and the statement made by the Finance Minister, Zainab Ahmed, regarding FG’s plan to phase out tax relief for matured companies.

What you need to know about FG’s tax incentives

Between 2019 and 2021, the government forfeited N16.76 trillion revenue to tax reliefs and concessions obtained by the pioneer companies, and was expected to also write off N2.4 trillion between 2022 and 2024.

The N2.4 trillion was broken into N658.08 billion for 2022, N789.70 billion for next year and N947.64 billion will be written off in 2024.

Although tax relief encourages investment in various sectors of the economy, it is also seen as a form of evading tax and a loss to government’s revenue.

With crude oil turnover depreciating and debt rising, the Nigerian lawmakers have been pushing for FG to cut down on tax incentives to push revenue up, which would reduce its reliance on loans to finance the budget.

An end to pioneer tax waivers is coming

Last week Wednesday, after the Federal Executive Council meeting presided over by Vice President Yemi Osinbajo, Ahmed told Journalists that FG was planning to phase out tax incentives for pioneer companies, and extend the relief to real infant industries for better reward.

READ ALSO:Zainab Ahmed reveals reason Buhari withdrew $35.6m from Excess Crude Account

“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.”

Dangote, others affected by cancellation of pioneer tax incentives

About 172 companies are in line to benefit from the tax relief, but haven’t received approval yet, the second quarter report of the Pioneer Status Incentive disclosed.

Checks showed that Dangote Coal Mines Limited, Flour Mills Nigeria Plc, Max Air Limited, CCECC Nigeria Limited, and Emzor Pharmaceutical Industries Limited applied for tax relief under the PSI.

Also on the application list are Seven/Up Bottling Company Limited, Jabi Mall Development Company Limited (extension), and Red Star Oil and Gas Limited.

Ripples Nigeria gathered that Mikano International Limited, Dukia Gold & Precious Metals Refining Company Limited, Jigawa Fertilizer & Agro Allied Limited, AA Rano Nigeria Limited, amongst others also filed pioneer tax relief applications.

However, with two weeks to the end of this year and the government looking to end pioneer tax relief in 2022, and offer the waivers to real infant industries next year through the 2022 Finance Bill, these companies in about 71 industries will likely lose the opportunity to benefit from the tax relief.

The bill is expected to be signed before President Muhammadu Buhari’s administration hands over to the winner of the 2023 Presidential election, which is being contested by Peter Obi, Bola Tinubu and Atiku Abubakar.

Any change to the tax waiver policy would have to wait until 2024 when a new Finance Bill would be signed into law by the new administration.

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