Dangote and other private companies are set to access 50% of expenditure in tax credit from the Federal Inland Revenue Service (FIRS).
According to FIRS executive chairman, Tunde Fowler, the plan is to solve infrastructural deficit in the country by reducing the actual amount of tax to be paid by private companies, while these companies also share the cost of infrastructural projects with the Government.
The details: While speaking in Abuja, Fowler stated that more than 10 local companies had applied for the scheme to receive 50% of expenditure in tax credits. He said the plan was to make sure that those companies get 50% of expenditure in tax credit.
Providing further details on the biggest benefactors from this arrangement, Fowler stated that only two companies have benefitted from the partnership of receiving tax credits for infrastructure projects thus far, Dangote Group was mentioned and another anonymous company. Alluding that the arrangement may reduce the amounts he collects,
“It may reduce the amount of my collections initially, but … 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 stated.
Improving Revenue: Basically, oil revenue has been depleting in recent times with high cost of debt servicing, and the government has been making moves to explore other sources to boost revenue away from crude sales.
Fowler, speaking further 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, I believe that Nigeria should review the VAT rate to 7.5%,” he said, though any such change would have to be implemented by the government.”
What this means: The tax credit scheme was signed into law, under an executive order, by President Muhammadu Buhari in January. With the arrangement, companies who agree to share the cost of infrastructural projects with the Government will not have to worry about paying 50% of cost incurred on road construction and related public goods.