According to some economists, Granting tax break to additional 27 industries and products in Nigeria is a right step towards economic recovery. They also described the move as an indication that Nigeria is on course out of economic recession and firmly towards growth.
These were the views of some prominent economists and analysts, including Chief Consultant, B. Adedipe Associates Limited, Biodun Adedipe; and Chief Executive Officer, Economic Associates, Ayo Teriba.
“The approval by the Executive Council of the Federation, FEC, of 27 additional industries and products to enjoy pioneer status is a step in the right direction,” Mr. Adedipe said.
“The decision is showing two things that there are thinkers in the present government and that they are doing the right things at the right time,” he added.
He further said that if the system and its processes are not abused, Nigeria would experience a strong recovery towards sustained growth.
“Malaysia and several other enviable economies have used the same instrument to good effect. Rather than reduce government revenue, it has huge potential to lever revenue and enable rapid job creation,” Mr. Adedipe said.
For Mr. Teriba, government’s move by giving incentives to prospective investors means it was determined to attract investors to do business under the atmosphere created with the National Economic Recovery and Growth Plan.
He said since October 2015, following the suspension of the scheme, prospective investors had been applying for the incentive without success.
“With the approval of additional industries and products to enjoy the incentive, investments will come in based on the industries that have just been given the incentives.
“The decision is a positive development for the economy. It is going to be an increase in the investment flow and technology inflow and a boost to employment generation.”
The Lead Director, Centre for Social Justice, CENSOJ, Eze Onyekpere, however is of the opinion that granting tax breaks to prospective investors does not add up to government’s commitment to raise more revenue.
“Government wants to raise more revenue, and government is now doing more tax exemptions. How does that add up?
“It doesn’t make sense to me, because if one was raising more revenue and creating more tax breaks, how long would this tax breaks last?”
For Mr. Onyekpere, even assuming tax breaks were good, there was no structured investment by the federal government to ensure the investors would pay-back the tax in future, to take care of whatever was lost.
“We can’t continue this not well thought out ideas by people who simply wake up in the morning and have brainwaves and not subject it to proper scrutiny,” Mr. Onyekpere said.
Last week, the federal government, at the end of the weekly FEC meeting announced the reviewed of the provisions guiding the pioneer status incentive to cover the 27 new industries.
Minister of Industry, Trade and Investment, Okechukwu Enelamah, said the new industries were arrived at after a review of the previous list to bring them in line with the country’s current economic realities captured under the ERGP.
Pioneer status is a tax holiday granted companies investing in new sectors of the economy approved by the government to boost employment generation and grow the economy.
Governed by the Industrial Development Income Tax Relief Act, the pioneer incentive scheme allows beneficiaries to enjoy tax reliefs for venturing into sectors considered either not mature or requiring government support to grow.
Under the current arrangement, benefitting companies would enjoy an initial three years tax holiday, subject to either additional one year, or maximum two years renewal, but not exceeding five years in total.