Nigerians have reacted to the review of the five-year tax incentive enjoyed by Dangote group to ten years by the Nigerian government for the rehabilitation of some roads in the country.
The Minister of Power, Works and Housing, Babatunde Fashola, had announced the government’s decision while speaking at the Businessday Road Construction Summit, held in Victoria Island, Lagos, last week.
Mr. Fashola revealed that the government had reviewed the five-year limit on tax order enjoyed by the group to a 10-year period to sustain private investment in road infrastructure, because it is a long-term asset.
The minister also announced that construction of the Apapa to Oworonshoki end of the Lagos-Ibadan expressway has been handed over to the company.
But speaking in separate interviews with PREMIUM TIMES, tax experts and civil society organisations officials expressed concerns about the agreement.
Tunde Aremu, Policy Advocacy and Campaigns Manager at ActionAid, a non-governmental organisation, said although not all tax incentives are bad, but the approach to granting such incentive is important because some are not transparently handled.
“As ActionAid has always maintained, not all tax incentives are bad but some are questionable. There are issues of mindsets and principles that drive the granting of the incentives. There are also concerns as well on the processes and approaches of the grant of the incentives,” he told PREMIUM TIMES in an interview.
“A critical question that needs to be asked is what was done with the earlier incentives granted. Has there been an audit of the delivery on the existing or previous tax breaks given? Has the company granted the incentives delivered on the condition for the grant?” he asked.
Mr. Aremu also expressed reservations for the granting of incentives and waivers beyond three years, saying the decision is counterproductive and illegal.
“The granting of incentives beyond three years is contrary to existing laws and is thus illegal. It is not just an abuse of system, breaking of the rules but it is also a brazen show of contempt of the citizens who have expressed concerns over similar actions in the past. It shows those taking such decision hold the people and the laws in contempt.”
On his part, Chinedu Bassey of the Nigeria Tax Justice and Governance Platform, told PREMIUM TIMES that if not properly allocated, tax waivers promote inequality.
He said: “As a matter of issues we have always talked about, we are not against industries being encouraged in Nigeria to get their feet on because we want to encourage the productive sector to be up and running. But over time we have seen that it is rather counterproductive because the company or an entity or a portfolio like the Dangote group we all know has the capacity to stand and support the economy by paying their proper taxes to support the economy to come up.
“Our question has always been: it’s not about the incentive but who really deserves an incentive. We see that as counterproductive to the economy and a trend that is promoting injustice and inequality because if a company like Dangote group is not paying tax and a small company is compelled by tax authorities to pay one tax or the other; maybe single, maybe multiple and from wherever place: federal, state or local government, we see that as a show of injustice and something that is creating poverty.”
Speaking with PREMIUM TIMES on Friday, Musa Rafsanjani, executive director, Civil Society Legislative Advocacy Centre (CSLAC), said tax waivers given without due process could lead to loss of revenue for the nation.
“First and foremost,” he said, “we have concern in the manner in which tax waivers have been given to private companies in Nigeria particularly also some of the corporations because where you give out tax waivers, it is supposed to be an incentive to complement because these are supposed to be collected for the development of the country.
“If the government uses its political will to give waivers to companies without following due process, it can be tantamount to a lot of abuse,” he explained.
Mr. Rafsanjani argued that tax waivers have always been subjected to abuse in Nigeria, a development that has done a lot of damage to the nation’s economy.
“The revenue generated for Nigeria was very poor because of the compromise by some of the government officials who gave tax waivers to so many companies which they allegedly were part of. So, what they did in the past was to bring in companies that they were part of or have interest in and give waivers.
“MTN also enjoyed huge waiver from the Nigerian government which was not actually done transparently,” he added.
Commenting on the Dangote incentive, he called for proper monitoring of the process in a transparent system that would involve civil society organisations working in the area of tax.
“On the case of this new agreement with Dangote, first of all we would have appreciated if there was proper monitoring mechanism to ensure that what Dangote company would do for the (road) development would cover the tax (waiver) that the company is supposed to be given; to ensure it’s actually properly monitored and measured. The government official may not pursue compliance with some of these agreements.
“We would have expected the government to set up committee that would involve genuine responsible civil society organisations that are working in the area of tax issues so that they can properly monitor what Dangote company is supposed to even pay back in the tax waiver for the development.”
On longer time tax incentives, Mr. Anwal said the practice was unacceptable as it was open to abuse and not easily measurable.
“We do not subscribe to a longer time waiver; it is not proper. Waiver should not be more than two, three years. So that after that, you’d evaluate whether there is a compliance to the beneficiary and all,” he said.
But in his intervention, Taiwo Oyedele, Head of Tax and Corporate Advisory Services at PwC Nigeria, said the decision was a good one given the inability of government to handle certain projects efficiently. He, however, added that whether the decision to grant tax waiver to Dangote group was good for the nation or not would depend on details of the agreement.
“As to whether it (the decision) is good or not good will depend on the details. What you see in the public space may not exactly tell the entire story,” he told PREMIUM TIMES in an interview.
“Government, for example, is highly and largely inefficient. So if government was going to construct the road for example, it would need more money than it should and the quality of the road is not good. So if the arrangement is just that, instead of paying up tax of, say, N5 billion, use the money to construct the road, definitely the private sector would do a better job, in terms of quality and efficiency. To that extent I will say it is fine.
han they are getting, then that’s an issue. But I don’t have the details to say whether this particular deal is in itself good or bad.”
Meanwhile, he Nigerian government is awaiting the design of the 35 km stretch excluding the about 7 km portion that has been completed by the previous administration around Mile 2 area.
Mr. Fashola, commenting on the plan, said the design will determine the scope of work on the road.
“From the design, we will determine the cost and the scope of works which we hope can be executed quickly,” he said.
