The Federal Inland Revenue Service (FIRS) and the Institute of Chartered Accountants of Nigeria (ICAN) Monday disagreed over proposed 10-year tax holiday for new companies in the country.
The Senate began the move to alter the Company Income Tax Act (CITA), which seeks to increase pioneer status to new companies in Nigeria from five to 10 years.
While FIRS strongly opposed the proposal, ICAN supported it.
The FIRS noted that giving further incentive to companies would lead to loss of revenue to the country
At a public hearing on the Company Income Tax Act (CITA), Chairman FIRS Babatunde Fowler, supported the current provision in CITA, which gives five year tax holidays to new companies.
Using the telecommunications industry to back his position, Fowler submitted that five-year is ‘more than sufficient’ for investors to recoup their profit.
He said, “When one looks at the telecommunications companies that were given incentives a lot of them actually did make profit before the pioneer status of the incentives even expired.
“So, I wouldn’t like us to grant such incentives for a period of 10 years. We believe that 10 years is a very long time for any business not to generate profit. And I believe investors would have taken due recognition of their investments and the time that they expect for profit to be made.”
Section 34 (a) of the proposal states that “A new company going into business where infrastructures such as electricity, water or tarred road are not provided by the government ‘ shall be exempt from tax for the first ten years of its operation.”
According to the FIRS boss, most investors hardly invest in areas where they can’t make profit within five years of investment.
But the Institute of Chartered Accountants of Nigeria (ICAN) differed.
According to ICAN this would encourage entrepreneurs and existing companies to expand their operations.
The Institute recommended that the proposal should also include existing companies going into a line of business where infrastructures are not provided by the government.
ICAN President, Mallam Isma’ila Zakari said: “This is a welcome development that will encourage entrepreneurs to invest and expand their operations. However, this section should be amended to include existing companies. This would encourage existing companies to expand their operations so as to benefit from the incentives when they invest in such locations.
“We recommend that the new section should read as follows: ‘A new or existing company going into business where infrastructures such as electricity, water or tarred road are not provided by the government shall be exempted from tax on its operation for the first five (5) years for existing company and ten (10) years for a new company’”.
Senate President Abubakar Bukola Saraki, who inaugurated the public hearing said the bill will not only boost employment activities in the rural area but also provide employment opportunities for the teeming unemployed youths.
“The proposed amendments will encourage investments in the industrial and mining sectors of the economy; especially in the rural areas where ordinarily it would have been unattractive to invest.
“It is expected that when the CITA Bill is passed into law, economic activities that would be generated through tax moratorium assured by this Bill, will pilot the much canvassed employment opportunities for our qualified youths; and open up communities where these companies are sited,” Saraki said.