Executive Director of Civil Society Legislative Advocacy Centre (CISLAC), Auwal Musa Rafsanjani, on Monday, called for robust legislative instruments that will block leakages through tax incentives, which has led to the loss of over N40 trillion in revenue.
He gave the charge in Abuja, during the opening of a two-day sensitization and capacity-building workshop on “Identifying and strengthening legislative pathways for reforming tax expenditure governance in Nigeria” organized by CISLAC in collaboration with the National Institute of Legislative & Democratic Studies (NILDS).
“Nigeria is losing a lot of billion nairas to suspicious and dubious tax waivers, concessionaires, tax holidays, and what have you… But unfortunately, these resources are being diverted or stolen.
“Given that Nigeria is always going to borrow money, and even when we borrow it, it’s not being complied with based on our fiscal responsibility law.
“The projects that Nigeria always says they are borrowing money to do, we hardly see those projects being executed. So, we did not need to go and borrow money, when we had a lot of money that we should have utilized domestically. N40 trillion is a huge amount of money.
“Therefore, there’s no reason why Nigeria should continue to go and be borrowing money when we are losing a lot of money that we could have saved for development.
“The oil thefts have continued to happen in this country, the authorities are aware of that, but no serious action has been taken to block that.. therefore, money laundering and illicit financial flow are all part of what is crippling the economy.
“Currently, many factories have closed down because there’s no power and the environment in which a the business will also thrive is also marred with a lot of corruption. So, a lot of jobs are being lost on a regular basis in this country, increasing the number of unemployed people, increasing the number of poverty in the country and therefore we believe that it is important as a responsible citizen, we should do everything possible to support the sincere efforts of the government to block leakages,” he noted.
While noting that taxation remains the most viable and reliable fiscal policy tool for revenue mobilization towards sustainably financing development, he averred that Nigeria has “long explored a Tax expenditure regime to realize significant growth and development in pioneer industries, and foreign direct investment.
“In principle, tax waivers, concessions and exemptions are sound and ideal arrangements both as economic tools and from the viewpoint of competitive international trade. This is because local businesses/industries must be positioned to improve their fortunes and attain international competitiveness.
“However, the Nigerian case appears plagued with challenges, including abuses observable to the Nigerian public. According to the Global Tax Expenditure Database 2020 report, Nigeria had a Tax Expenditure of N5.84 trillion (3.8% of its GDP), just over 50% of its 2020 budget. Similarly, the Federal Government noted that the Tax Expenditures in 2021 amounted to N6.68 trillion, approximately 4 per cent of the GOP.
“Reports of indiscriminate waivers and concessionary approvals have all contributed to questioning this government initiative’s bearing and economic sustainability.
“The law regulating the granting of incentives places enormous discretionary powers to the Executive arm of government. The governance of the incentive regime is also, at best, opaque and lacks the scrutiny necessary to guarantee transparency and accountability in the process, leading to a situation where the supposed benefits are not optimized. The offer of these incentives, though put in place presumably to grow the economy, is not without associated costs.
“Recent studies have shown that investors do not see these incentives as key factors to attract inbound investments and tend to be injurious to the economies of implementing countries in the long run. This is as it is seen to reduce the propensity to generate needed resources for providing socio-economic services, encouraging local industrial revolution and gross domestic production, growth and national development.
While acknowledging that the 10th Assembly has reportedly launched over 50 probes into the alleged mismanagement of funds and other infractions by MDAs, including the recent House probe into the N14 trillion revenue loss to tax incentives, waiver abuses by public institutions and companies benefitting from such incentives, he lamented that these investigative hearings “are yet to yield any significant prosecutorial actions and/or outcomes as the National Assembly lacks the constitutional power to prosecute erring officials.”
In his remarks, Deputy Chairman, of the House Committee on Aids, Loans & Debt Management, Hon. ‘Lanre Okunlola, underscored the need for relevant Standing Committees in the Senate and the House to strengthen the oversight function, conduct mandatory review and impact assessment of the tax system.
He observed that these provisions for tax incentives are informal exemptions, deductions and credits designed to promote specific policies and objectives so that our economy can grow again.
