Taiwo Oyedele, the Chairman of the Presidential Committee on Tax and Fiscal Policy Reform, has expressed deep concern over Nigeria’s annual losses of up to N6 trillion in
tax waivers. This staggering figure mirrors the country’s total annual revenue, raising questions about the economic viability of such practices.
Confirming the N6 trillion estimate recently cited by the Senate, Oyedele emphasized the need for a critical examination of the impact of these tax waivers on the economy. He stated, “If we were a country where we’re making N60, N70 trillion and we gave away, maybe we would say, ‘We can live with it.’ But the revenue generated by the FIRS in 2021 was just barely N6 trillion. And then you give that away in tax waivers and incentives.
“Like now, I’ve requested that government suspend VAT on diesel for very obvious reasons as well as suspend VAT on import duties [and] CNG. There are things you have to do par time because, at the end of the day, governance is about the people,” he said.
You may not be able to immediately measure the economic impact on those ones, but you, of course, can tell the social impact.”
While acknowledging the importance of exemptions from value-added tax (VAT) on essential items like basic food and medical expenses, Oyedele highlighted the challenge of measuring the economic impact of other waivers. He stressed the need for interventions such as suspending VAT on diesel and import duties, emphasizing the social impact on the populace.
Without such interventions, Oyedele warned of potential social unrest, stating that people might take to the streets if life becomes “completely impossible” and they perceive government insensitivity.
The tax reform committee chairman underscored the committee’s focus on scrutinizing various incentives, including income tax exemptions, duty and VAT waivers, and Free Trade Zone Area privileges. He explained the committee’s approach, saying, “[We are] asking ourselves, ‘If we were going to design a new incentive regime for Nigeria today, will this qualify? On what basis? How can you ensure that it’s targeted? How can you measure the impact on the economy?’”
To address the historical lack of scrutiny on incentives, Oyedele revealed that the committee is incorporating “sunset provisions” into these measures. This approach involves using data and stakeholder engagement to determine the duration of incentives, preventing prolonged periods of revenue loss as seen historically.
“[We are] asking ourselves, ‘If we were going to design a new incentive regime for Nigeria today, will this qualify? On what basis? How can you ensure that it’s targeted? How can you measure the impact on the economy?
“But it could also be maybe another five or 10 years. But whatever it is, we will be using data and engagement with stakeholders to decide and design, ‘How long do we need the incentive for?’ and put those subset clauses in the law, so that it wouldn’t be another 20 years before we realize that we’ve been losing money for so many years in the past, as we have seen historically,” he said.
As the tax reform committee continues its review, Oyedele emphasized the importance of balancing social impact with economic considerations to ensure sustainable and targeted fiscal policies for Nigeria.
