From Fred Itua, Abuja
The Federal Inland Revenue Service (FIRS) and the Institute of Chartered Accountants of Nigeria (ICAN), yesterday, disagreed over Senate’s 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 opposed the proposal, ICAN supported it. The two institutions voiced their disagreements on the proposal at a public hearing on the CITA organised by the Senate Committee on Finance.
Chairman of FIRS, Babatunde Fowler, in his submission, okayed the current provision in CITA, which gives five-year tax holidays to new industries.
The tax agency argued that giving further incentive to companies would lead to loss of revenues to the nation.
Citing the case of the telecommunications industry to buttress his argument, Fowler submitted that five years 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 broke even before the pioneer status of the incentives 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 they expect for profit to be made,” he said.
Section 34 (a) of the proposal states that “A new company going into business where infrastructure such as electricity, water or tarred road are not provided by the government ‘shall be exempt from tax for the first 10 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. For its part, ICAN argued that the policy would encourage entrepreneurs and existing companies to expand their operations. The institute, however, recommended that the proposal should also include existing companies going into new lines of business where infrastructure 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 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 infrastructure 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 years for existing company and 10 years for a new company’.”
Meanwhile, Senate President, Bukola Saraki, in his opening remarks said the bill will not only boost employment activities in the rural area but also provide job opportunities for the teeming unemployed youths in the country .
“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,” he said.