Fed Govt To Grant N5.5trn Tax Waivers In 2023
The Federal Government has budgeted N5.51tn for tax expenditures in 2023.
This was according to the 2023 fiscal framework document obtained by our correspondent.
According to Tax Foundation, tax expenditures are a departure from the “normal” tax code that lowers the tax burden of individuals or businesses, through an exemption, deduction, credit, or preferential rate.
The expenditures can result in significant revenue losses to the government.
Wikipedia also describes tax expenditures as government revenue losses from tax exclusions, exemptions, deductions, credits, deferrals, and preferential tax rates.
The tax expenditures in the 2023 budget covers Companies Income Tax, Value Added Tax, Customs Duties, Imports Value Added Tax, Petroleum Profits Tax and Road Infrastructure Tax Credit Scheme.
The N5.51trn budgeted for 2023 is 22.07 per cent lesser than the 7.07tn budgeted for 2022.
A breakdown showed that in 2022, the tax expenditure budget was N658.08bn for Companies Income Tax, N4.97tn for Value Added Tax, N792bn for Customs Duties, N237.6bn for Imports Value Added Tax, N371.47bn for Petroleum Profits Tax and N44.26bn for Road Infrastructure Tax Credit Scheme.
In 2023, the tax expenditure budget was N789.7bn for Companies Income Tax, N3.13tn for Value Added Tax, N871.2bn for Customs Duties, N261.36bn for Imports Value Added Tax, N408.62bn for Petroleum Profits Tax and N45.26bn for Road Infrastructure Tax Credit Scheme.
Based on the breakdown, the decrease in tax expenditure only applies to VAT as others recorded an increase.
This occurred as the Federal Government plans to introduce more sin taxes and cut down on tax incentives in 2023 through the proposed 2022 Finance Bill.
The Federal Government has also proposed the suspension of tax relief and rebates being granted to companies established in locations lacking public infrastructure, that are providing electricity, water and other amenities for themselves.
Economic Confidential recently reported that the Federal Government gave tax reliefs and concessions valued at N16.76tn to large companies between 2019 and 2021.
As of the end of 2021, 46 companies had benefitted from various tax incentives and duty waiver schemes while the requests of 186 companies were still pending.
The Managing Director/Chief Executive Officer of Cowry Asset Management Limited, Mr Johnson Chukwu, said that introducing new taxes and cutting down some tax incentives might negatively affect manufacturers and consumers in Nigeria.
He said, “We could see a situation where the manufacturers are unable to pass on those costs and absorb the costs, which will reduce their profitability and even the appetite for further investments. If they are able to pass those costs to consumers, this will be a difficult situation because of the existing weak purchasing power.”