MPC member raises alarm over Tax Credit, says scheme unsustainable

By Sodiq Adelakun

A member of the Monetary Policy Committee, Mike Obadan, said Nigeria’s tax credit schemes are unsustainable.

This is according to his statement at the last Monetary Policy Committee meeting, which was released by the Central Bank of Nigeria; he called on the government to revisit its financing methods for capital projects.

According to him, “Importantly, the government needs to revisit its mode of financing capital projects, in particular, infrastructure. The present financing method entailing borrowing and tax credit schemes are unsustainable.

“The Tax Credit Scheme involves loss of tax revenue to the government. Therefore, the Federal Government should develop the will to cede key infrastructure financing to the Infrastructure Corporation of Nigeria.

“This will benefit the government as it does not entail the loss of tax revenue; the projects are developed and the country/citizens benefit. Patronising INFRACO will provide room to expand the fiscal space for priority pro-poor spending. The most vulnerable in society deserve fiscal support to cope with the soaring food and energy prices while in other areas, fiscal consolidation is inevitable in support of monetary policy to control inflation and also reduce debt accumulation.”

Meanwhile, earlier this year, the former Minister of Works and Housing, Babatunde Fashola, explained that the tax credit scheme is a new model that encourages partnerships with private companies, where taxes are paid in advance to enable the government to invest in notable projects that would be beneficial to its citizens.

Recall that, as of the end of 2021, 46 companies had benefitted from various tax incentives and duty waiver schemes, while the requests of 186 companies were still pending.

They were beneficiaries of the pioneer status tax relief under the Industrial Development Income Tax Act with tax reliefs for three years.

These were contained in the tax expenditure statement reports in the Medium-Term Expenditure and Fiscal Strategy documents posted on the website of the Budget Office of the Federation.

The TES deals with revenue forgone on Company Income Tax, Value Added Tax, Petroleum Production Tax, and Customs duty.