THE Senate today approved a bill for second reading that would change the Federal Inland Revenue Service (FIRS) Act to control the procedures for giving investors and companies operating in Nigeria tax vacations, remission of import duties, and investment incentives.
Sen. Yahaya Abubakar Abdullahi (PDP, Kebbi North) sponsored the measure with the aims to curtail the federal government’s ability to impose tax breaks and other incentives on businesses without congressional approval.
It aims to add a new Section (9) to the FIRS Act that would require the tax authority to obtain the National Assembly’s legislative nod before issuing new or extended business tax incentives and waivers.
“Such requests and applications for parliamentary approval shall stipulate clear conditions and justification for granting tax waivers and investment incentives,” it said.
The bill became necessary, according to Senator Abdullahi, who led the debate, because of leaks and loopholes in tax collection and remittances to the government, which led to revenue shortfalls and a high public debt profile.
He voiced concern that the nation hadn’t been able to meet its revenue goals over the previous five years.
Data from the Debt Management Office (DMO) revealed that in 2018, N3.9 trillion of the projected income of N7.2 trillion was actually realized.
While in 2019, the target was N7 trillion, the actual revenue collected was N4.12 trillion. The sum of N5.4 trillion in revenue was targeted in 2020 but N3.9 trillion was received.
In 2021, the target was N6.4 trillion while N4.64 trillion was received. In 2022, the targeted revenue was put at N5.82 trillion while the actual revenue received was N3.66 trillion.
The legislator voiced alarm over the fact that debt service now consumes over 90% of government revenues, up from 32.7% in 2015.
He said, “If this trend of relentless reliance on increasing public debt to finance the budget continues without a corresponding rise in revenues, the country shall slide into distress and insolvency.
“With petroleum revenues dwindling into insignificance, we must rise to rationalize the system of tax administration by blocking loopholes, and tax evasion and ensuring utmost efficiency in tax management.
“It is important to note that even while 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.
“In early 2020, the FIRS reported a loss of N 1.3 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.
“It is obvious that there are several other similar cases, and all this happening in the face of the government’s increasing difficulties to fund its various development projects and welfare commitments across the country.
“The overall intendment of this Amendment Bill, therefore, is to ensure that government can pool all its collectibles in one coffer, to be able to target its allocations to those areas of priority in the country.
“An effective way to do this is to re-organize the processes of granting tax holidays, investment incentives and waivers to private individuals and corporate entities for effective coordination and transparency.
“We must also ensure that such applications are placed before the National Assembly, to ensure that all arms of the government are on the same page on this delicate matter.”
The bill, after scaling the second reading was referred to the Senate Committee on Trade and Investment for further legislative work.
