Over 10 Nigerian companies have applied to participate in a Federal Government scheme that will see them swapping tax credits for a share in infrastructure project costs as part of a drive to diversify Africa’s biggest economy away from its reliance on oil sales.
Babatunde Fowler, executive chairman of the Federal Inland Revenue Service (FIRS), who announced this in an interview with Reuters on Wednesday, said under the scheme, participating companies will receive 50% of project costs in tax credits.
With Nigeria eventually signing up to a new continent-wide free trade agreement in July, manufacturers have called for improvements to the road, rail, and power networks to enable her to compete with firms from across Africa.
Already, Fowler said, two companies, including the Dangote conglomerate, have successfully applied to receive tax credits for infrastructure projects under the scheme.
For him, although the scheme “may reduce the amount of my collections initially… as I expand my tax net, I would make up for that reduction. We believe we would generate more revenues from the additional infrastructure that would be created.”
He also said Nigeria had a target to nearly double tax revenues this year from 2018 due to a surge of new payers following the end of amnesty and the introduction of a new database that uses biometric data.
The tax credit scheme was signed into law, under an executive order, by President Muhammadu Buhari in January.
Fowler said from the N5.32tr ($17.39bn) collected in taxes in 2018, his office is targeting N8.9tr this year, which he believes is doable because the number of taxpayers is expected to more than double from 20m to 45m this year. The growth, though ambitious, he continues, will come from the inclusion of people identified in a tax amnesty that ended this year.
Fowler said that change, coupled with a new database drawing on biometric data tied to bank accounts, had led to an improvement in compliance and collections in the first eight months of this year.
He said a move to include value-added tax (VAT) on all online transactions was expected to come into force in January 2020. He said e-commerce was, at present, a tax loophole.
“There are a lot of areas that are not yet captured,” he said.
He is also not giving up on the plan to raise the VAT rate from the current 5%, one of the lowest in the world.
“I believe that Nigeria should review the VAT rate to 7.5%,” he stressed
In the Executive Order 007 2019, signed by President Buhari in January, six companies, including Dangote Industries Limited, Lafarge Africa Plc; and Unilever Nigeria Plc, showed interest in investing in 19 road projects, in 11 states across each of the six geo-political zones. Others interested in the roads measuring 794.4 kilometres, under the Road Infrastructure Development and Refurbishment Investment Tax Credit Scheme are- Flour Mills of Nigeria Plc, Nigeria LNG Limited, and China Road and Bridge Corporation Nigeria Ltd.
Except there is a change of plan, a 13-member scheme’s management committee of various road and bridge projects under the pilot phase will be chaired by the Minister of Finance, Mrs. Zainab Shamsuna Ahmed.
Once the scheme is approved, the “eligible road projects will be published in an Official Gazette, and modalities would be agreed upon with the investors to accelerate the implementation of these projects, the verification of eligible project costs, as well as the issuance of tax credit certificates to the Investors.”