A whopping N12.384 trillion will be forgone by the Federal Government (FG) will forgo N12.4 trillion as tax waivers, concessions and incentives in the four years (2023 – 2026).
Beneficiaries of these revenue losses include big corporations, start-ups and politically exposed individuals (diplomats).
Revenue forgone is a measure of government revenue lost to various waivers and concessions, including tax holiday, import duty relief, accelerated write-off of capital assets, tariff barriers to protect the investment from foreign competition, industrial estates and freedom of transfer of profits and capital among others.
Vanguard findings from the Medium Term Expenditure Framework (MTEF) 2024 – 2026, showed that the FG is targeting N2.645 trillion in tax exemption at the end of 2023.
The figure is projected to rise to N2.71 trillion in 2024, representing a Year-on-Year (YoY) increase of 2.5 percent. It is expected to rise to N3.23 trillion in 2025 and N3.8 trillion in 2026.
Meanwhile, a total of N2.61 trillion was granted as tax waivers by the government in 2022 alone.
Breakdown of the tax expenditures statement for 2022 showed that Value Added Tax (VAT) relief accounted for a chunk of the tax exemptions at N1.404 trillion, representing 53.4 percent of the total tax exemptions granted by the FG in 2022.
This was followed by Companies Income Tax (CIT) exemption of N534.81 billion, while Customs exemptions and Petroleum Profit tax (PPT) waiver amounted to N552.81 billion and N129.45 billion respectively.
The exemptions, according to the Budget Office of the Federation in the MTEF report, applied to imported goods covered by diplomatic privileges, military hardwares, fuels & lubricants, hospital & surgical equipment, aircrafts (their parts and ancillary equipment), plant and machinery imported for use by companies in export processing zones, health and medical, import duty and VAT on commercial airlines.
The report listed the budgetary functions exemptions to include economic growth and development; human capital development; infrastructure development; and public administration, which covers governance, security, and international relations.
Breakdown showed that oil marketing companies accounted for 35 percent (N187.2bn) of total CIT forgone. Meanwhile, the CIT expenditures at N534.81 billion amounted to 19 percent of N2.83 trillion total companies income tax collection during the year.
The total customs exemptions for 2022 l, also represents 41.2 percent of the total N1.340 trillion customs revenue.
The exemptions comprised of VAT relief granted on imports (N167.18bn), waivers and concessions on import duty (N307.55bn), ECOWAS Trade Liberalization Scheme (ETLS) (N16.39bn), Surcharges (N20.88bn), Comprehensive Import Supervision Scheme (CISS) (N15.81bn), and other l
SOURCE: VANGUARD
