Operators in the nation’s oil and manufacturing sector got the highest tax exemption out of the N1.42tn granted to various sector by the federal government in 2022.
This is according to a breakdown of sectoral tax exemption obtained from the Medium Term Expenditure Framework and Fiscal Strategy Paper 2024-2026.
The report stated that revenue forfeiture to 21 sectors was part of measures to protect the investment from foreign competition, industrial estates and freedom of transfer of profits and capital among others.
Tax exemption is the waiver of a national tax, a fee or a charge and suppliers of goods excused can neither charge output VAT nor claim input VAT; No VAT is chargeable on the supply of exempt goods or services.
According to the new MTEF/FSP, the government forfeited N739.74bn of its revenue under tax expenditure on exempt supplies, while 675.83bn was foregone as tax expenditure on zero rated supplies.
The report stated, “Zero Rating is the total waiver of taxes on goods and services mainly due to their societal importance or are consumed in foreign jurisdictions. Thus, no VAT is payable on the supply (it is charged at zero per cent). The suppliers of zero-rated goods or services claim input VAT.
“Tax expenditure, with respect to VAT, therefore, is the revenue foregone due to exemptions, zero-rating of certain goods and services as well as exemptions from payment by certain bodies or persons.”
A sector by sector analysis showed that Oil production, manufacturing, agriculture, commercials and trading, mining, professional services, pharmaceticuals, transport, banks and financial institutions were among the top 10 sector with N1.4tn worth of tax waivers.
Other sector including bottling companies, property and investment, printing, gas, textile, construction, automobile assembly, got N200bn as waivers.
The fiscal policy also indicated that exemptions worth N25bn were granted to improve infrastructure, about two per cent of the total import VAT tax expenditure.
SOURCE: PUNCHNG
