To boost investment and increase tax revenues, the federal government has reviewed its tax policies and incentives granted prospective investors in the Nigerian economy.
The Nigerian Investment Promotion Centre has already commenced the process to reduce the tax free period granted by the Federal Government under the pioneer status regime to three years.
Pioneer status is a tax holiday granted companies interested in investing in difficult sectors of the economy with the understanding that profits from their operations would be ploughed back to the business, to create jobs and boost economy growth.
At the moment, pioneer status grants a beneficiary company an initial five years tax holiday, subject to additional three years on approval.
The Nigeria LNG Limited, a multi-billion dollar joint venture between Nigerian National Petroleum Company, Shell Gas, Total and ENI, is one of the companies granted pioneer status in over 70 sectors of the country’s economy.
However, since 1999 when the company commenced operations to harness the country’s huge gas resources for exports, the policy had denied Nigeria huge revenue from company income tax.
Though Managing Director, Babs Omotowa, said at the celebration of the company’s 3000th cargo export milestone in March 2014 that it realised over $11billion revenue from feed gas sales in 15 years, it paid only N1billion as income tax for 2014, the first payment ever.
PREMIUM TIMES investigations revealed that the NIPC has already written to companies currently enjoying pioneer status about government’s decision to cut down the duration of the tax incentive granted under the Industrial Development (Income Relief) Act.
Under the new arrangement, a beneficiary would enjoy three years tax free period initially, subject to a two-year extension.
It was, however, not clear if companies granted the five-year pioneer status would be affected, or only those considered ineligible for the incentive the decision.
To ensure effective revenue collection, a tax administration unit has been created for the Oil and Gas Free Zone Authority to interface between free zone enterprises and tax agencies in the country.
The unit, which became operational since January 2015, serves as tax collection agent for tax agencies in the free zones as well as conduct periodic tax audits to ensure compliance.
Also, the unit would liaise with all tax agencies by obtaining tax clearance certificates for employees of free zone enterprises and arbitrate on any tax disputes between a free zone enterprise and any tax agency.
To make tax payment less stressful, the Federal Inland Revenue Service early this year introduced the Integrated Tax Administration System, an online system for submission of tax returns and electronic tax clearance certificates.
The system would also facilitate the validation of Tax Identification Numbers, ensure online correspondence with revenue service, automatic imposition of late filing penalties and interest, as well as allocation of withholding tax credits to taxpayers and electronic tax payments.
The system is to be implemented in phases, starting with the registration of taxpayers.