The Nigerian Investment Promotion Commission (NIPC) has revealed that the Federal Government approved tax holidays for 34 companies in 2023.
Lovina Kayode, Head of Incentives Administration at the commission, made this announcement during an end-of-the-year press briefing held in Abuja on Friday.
The disclosure comes in the wake of ongoing debates surrounding tax incentives and the substantial revenue loss attributed to annual waivers.
Kayode emphasized that these incentives are strategically implemented to enhance foreign investments in the country. Notably, not all companies are granted tax breaks, as the commission adheres to rigorous procedures in awarding waivers.
This move aligns with the government’s commitment to fostering a conducive business environment and attracting investments.
The NIPC has been instrumental in overseeing these processes, ensuring that the incentives contribute to the nation’s economic growth.
What NIPC is saying
The NIPC Head of incentives administration said:
- “The pioneer status incentive is a stimulus that allows a company to get three years of not paying corporate income tax, just to get more investments.
- “This process is stringent because our parent ministry and the federal inland revenue service are involved to make sure the right investors get this incentive.
- “So far this year, 34 applications have been approved and one of the things we intend to do is to ensure we are not just giving incentives to underserving companies. However, there is already a notion that Nigeria gives out too many waivers, incentives, and concessions.
- “However, tax expenditure which means what government has lost by granting pioneers status incentive is just a small amount compared to what the country gains by granting these incentives to qualified companies.”
She further unveiled plans by the commission to publish impact reports evaluating the effectiveness of pioneer status incentives. This move underscores the NIPC’s commitment to transparency and accountability in the realm of investment promotion.
She said:
- “On impact, that is one thing NIPC is planning on, next year, it is one of our biggest tasks to do an impact assessment. These incentives we gave out, how have they impacted the country in terms of job creation?
- “How many jobs are the companies creating and what kind of import substitution has come about because we have granted these incentives and how much would the government gain after the three years of them not paying these taxes.”
The last edition of this report that was published last year was for the second quarter of 2022.
More Insights
- The Nigerian Investment Promotion Commission (NIPC) facilitates tax holidays for companies with pioneer status as part of efforts to spur investment in various industries. This tax incentive aligns with the Industrial Development Income Tax Relief Act, No. 22 of 1971, aiming to encourage investment and industrial growth.
- Under the tax holiday provision, qualifying industries and products receive relief from corporate income tax for an initial three-year period, with the possibility of extension for one or two additional years. The pioneer status is granted to products or companies that are not already present in the country, incentivizing the introduction of new industries and fostering economic diversity.
- The NIPC’s second-quarter report for 2022 revealed that approximately 71 companies benefited from this tax incentive. This signifies an increase from the 46 companies reported at the end of 2021, indicating a growing utilization of the scheme. The sectors benefiting from these incentives span manufacturing, solid materials, pharmaceuticals, information and communication, trade, construction, waste management, electricity and gas supply, tourism, and infrastructure, among others.
- The tax holiday initiative underscores the government’s commitment to creating a conducive environment for businesses, attracting investments, and promoting economic development. It serves as a strategic tool to boost the presence of innovative industries and stimulate growth in key sectors of the economy.
- However, amid the ongoing implementation of these tax incentives, the Federal Government recently disclosed plans to review and potentially reduce tax waivers granted to companies operating in Nigeria. The move aligns with the agenda of the Presidential Tax Reform Committee, led by Mr Taiwo Oyedele, to comprehensively assess and streamline tax waivers, ensuring their alignment with national economic goals.
- As Nigeria navigates its economic landscape, the balance between encouraging investment through incentives and optimizing revenue generation remains a critical aspect of fiscal policy.
