Minister Okonjo-Iweala says tax waivers and concessions have had negative impacts on the country’s revenue base.
The Federal Government lost about N170.74billion to waivers and tax concessions granted to various government and private businesses in different sectors of the economy between 2011 and 2013, the Minister of Finance, Ngozi Okonjo-Iweala, disclosed on Thursday.
That disclosure is contained in her 102-page response to the 50 questions posed by the House of Representative Committee on Finance on the state of the country’s economy.
The document also showed that about N627.07billion was lost by the Nigeria Customs Services, NCS alone, as shortfall in budgeted revenue projections for the three years.
According to the minister, a total of N55.97billion, made up of N23.422billion (import duty exemptions) and N33.543billion (waivers), was lost in 2011, while about N55.345billion, consisting N46.789billion (exemptions) and N8.556billion (waivers) was lost in 2012.
A total of N59.417billion, composed of N33.319billion (exemptions) and N26.097billion (waivers), was lost in 2013.
Although the minister did not state how much benefits accrued to the economy in terms of returns as a result of the exemptions and waivers during the period, she noted the negative impact of the policy on the efforts by the revenue generating agencies to meet their targets.
Out of the budgeted revenue target of about N450billion for 2011, she said the customs service only realized N429.13billion, leaving a difference of about N20.87billion, while about N475.15billion was realized in 2012 out a revenue target of about N600.58billion, a shortfall of about N125.43billion.
Equally, the customs also fell short of its target by about N480.77billion in 2013, after the minister said it realized only N433.59billion out of the total revenue target of N914.36billion.
The minister said the NCS blamed its poor performance for the period on the reduction in imports due to government policies, particularly due to revenues forfeited from various concessions and waivers.
Mrs. Okonjo-Iweala had said that waiver and exemption policy was adopted to support government objective to enhance the capacity of the beneficiaries to produce their goods locally, making the country more self-reliant and reduce dependence on imports.
Apart from serving as one of the instruments to support the country’s industrial policy, as in other emerging and advanced economies – such as South Korea, Malaysia and China – she said the fiscal policy incentives were also intended to support the private sector, in view of the regulatory challenges they face in the domestic business environment.
Mrs. Okonjo-Iweala listed the aspects of business covered by the policy to include reduction in import duty rates or waivers for equipment and materials for the hospitality, power and aviation sectors; agricultural machinery; solid mineral equipment and gas-using equipment.
Others include the steel sector; specific manufacturing sub-sectors, including imports of completely-knocked down parts; automobiles and tyres.
She said the policy, which covered sectors seen as strategic areas capable of stimulating growth, supporting diversification of the Nigerian economy, and creating jobs for Nigerians, also covered additional programmes, such as the Export Expansion Grants, EEG, Scheme designed to promote Nigeria’s non-oil exports.
The sectors of the economy that benefited from the policy include agriculture, aviation, health, mines and steel, water resources, gas, power, as well as donations to states, education and related ministries, departments and agencies, MDAs.
Some of the legal instruments the minister cited that permitted the various categories of exemptions to businesses include the provisions of Schedule 2 of the Customs and Excise Tariff (Consolidation) Act: 1995 – 2001, Common External Tariff: 2008-2012 (as extended); the Customs and Excise Tariff etc. Act No. 16, 1997; and the Finance Miscellaneous Act 39 of 1990.
She said following the discovery that the discretionary approach adopted in granting waivers to individual businesses had resulted in various abuses, government resorted to the sector-wide waiver policy to provide specific incentives for some strategic, job-creating sectors.
Describing as “reprehensible” observed abuses by some local car suppliers granted waivers to import vehicles for institutions hosting sporting events to fill the gap for the absence of car leasing business in the country, Mrs. Okonjo-Iweala said government has adopted more stringent monitoring to curb such malpractices.
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