Nigeria,
Africa’s largest economy, is losing tons of money in investment schemes
that are supposedly meant to attract businesses and promote investment,
ActionAid, the international non-governmental organization whose primary
aim is to work against poverty and injustice says.
The NGO says that Nigeria is losing
revenue that amounts to as much as 3.8 percent of GDP on the average to
investment schemes that end up benefiting only the companies, and not
the country.
In investment schemes such as these,
Nigeria emerges a double loser because it doesn’t generate taxes from
such investments for a considerable number of years, which could go into
public use, neither does the company contribute to the generation of
employment or other economic causes for which the incentive was given.
According to IMF figures, Nigeria is
losing 0.5 per cent of its GDP in corporate income tax incentives given
to companies with Pioneer status alone. This would amount to around $2.6
billion a year, according to the International Monetary Fund.
The prevailing logic among the policy
thinkers who drive such policies is that bringing in such investments
will spur employment generation. But the NGO says that firms that enjoy
such tax benefits do not necessarily employ a lot of people.
“In Nigeria, employment among firms
receiving incentives stood at about 7,000 people as of 2013 – a paltry
figure in a country with 30 million youths seeking employment”.
“While over 80 percent of foreign direct
investment in Nigeria is in oil, this is an enclave sector with high
capital investment that employs less than 2% of the workforce”, it said.
The NGO also says that the provision in
Nigeria’s Export Processing Zones that abolishes the expatriate quota in
employment, and permits foreign firms to employ an unlimited number of
foreign workers sets back any goal to promote local employment.
In an era of low oil prices, Nigeria is
finding itself in a grapple for funds, as it seeks to fulfill its
obligations to its citizens, including providing one meal a day to poor
school children.
The country is running a deficit, and is
expected to borrow heavily to fill the gap in the budget and boost
spending. Borrowing however could come with more difficult terms this
time around, since the US-based global investment bank JP Morgan
expelled Nigeria from its influential emerging markets bond index, which
is tracked by more than $200 billion in investment funds. This could
cause the cost of borrowing to surge, leading to a heavier debt burden
on the government and Nigerian taxpayers.
In a bid to ramp up internal revenue
generation from taxes, President Buhari approved the appointment of
William Fowler, former Chief Executive Officer of the Lagos State Board
of Internal Revenue, to head the Federal Inland Revenue Service (FIRS)
and lead changes in the collection of taxes at the federal level. The
hope of the Presidency is that the success of Lagos state in the
generation of taxes can be replicated on a larger scale.
Under his leadership, the Lagos State
Board of Internal Revenue reportedly achieved a sharp increase in
internally generated revenue from an average of N3.6 billion per month
in January 2006, to an average of about N20.5 billion per month in 2013.
According to government figures, Nigeria
is further losing around $327 million a year on average on import duty
exemptions. This $2.9 billion loss (i.e., the losses from both CIT and
import duties), is equivalent to 577 billion at May 2015 exchange rates;
this is more than double the 2014 Federal government budget allocation
to health and more than the budget to education, the NGO said.
The IMF estimates that curtailing these exemptions could raise CIT by more than 0.5 percent of GDP.
For most countries, tax revenue is the
most important, sustainable and predictable source of public finance.
For the poorest countries especially, tax revenue is key to ensure they
have the funds needed to fund their development without being reliant on
foreign aid.
Edozie Ifebi
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