The federal government is working on phasing out the “antiquated” pioneer status incentive and other tax exemptions for mature industries with the 2022 finance bill.
The pioneer status incentive (PSI) is a tax holiday that grants qualifying industries and products relief from payment of corporate income tax for an initial period of three years, extendable for one or two additional year.
There are currently 71 industries eligible for pioneer status, which include manufacturing, solid material, pharmaceuticals, information and communication, trade, construction, waste management, electricity and gas supply, tourism, infrastructure, among others.
The federal executive council (FEC) presided over by Vice-President Yemi Osinbajo approved the bill at its meeting on Wednesday.
The bill is for tax collection in 2023.
Addressing state house correspondents after the meeting, Zainab Ahmed, minister of finance, budget and national planning, said the bill was designed to support the implementation of the 2023 budget.
With the FEC’s approval, she said the bill will now be transmitted by President Muhammadu Buhari to the national assembly for consideration and passage into law.
Ahmed said the 2022 finance bill would focus on five areas namely: tax equity, climate change and green growth provisions, job creation and economic growth, reforming tax incentives as well as generating revenue/ enhancing tax administration.
“The purpose of the tax equity reforms is to combat tax evasion and aggressive tax planning practices that some companies operating in Nigeria are involved in but also enabling the utilisation of ICT tools and using international best practice to assess taxpayers tax on a fair and reasonable basis,” Ahmed said.
“The climate change green growth focus will complement non-fiscal reforms that are designed to reduce greenhouse emissions and also to facilitate domestic and international investment in climate adaptation, as well as mitigation and also to enhance green growth and create jobs.
“The third focus area, job creation and economic growth is also designed to complement the ease of doing business and other reforms to support capital formation by the private sector as well as to foster enabling business environments for micro, small and medium enterprises for youth as well as women in businesses.
“It will also help to enhance the performance of businesses that are in the fintech, the ICT, entertainment, fashion, sports as well as the art space.”
“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.
“The fifth focus area is revenue generation and tax administration is to complement the ease of doing business and other reforms that enhance tax administration as well as to introduce targeted fiscal and non-fiscal reforms to amend, address and cure defects in existing tax and non-tax laws and regulations.”
Ahmed said the bill, when passed into law, would amend a number of fiscal laws in Nigeria.
These fiscal laws, she said, include the capital gains tax act, the company income tax Act, the customs excise tariff act, Federal Inland Revenue Service (FIRS) act, the personal income tax, stamp duties act, tertiary education tax, value added tax (VAT) act, the insurance act, and the Nigerian police trust fund act.
Other laws that would be amended are the Nigerian Agency for Science and Engineering Infrastructure (NASENI) act, finance (control and management) act and the fiscal responsibility act.
Source: Top Stories
