Tax & Business Matters - Nigeria

Economic growth and employment generation: What taxation can and cannot do

Did you know that in the past five years there has been an average of about 2 million new entrants into the Nigerian labour market every year while employment generation during the same period averaged only 160,000 per year?

In terms of economic strength, Nigeria’s GDP for 2011 was about US$240 billion making Nigeria number 41 in the world.

The question is "How far can taxation go in creating employment and economic growth for Nigeria"? Find out from the online version of my article published by Guardian Newspaper on Monday 28 May 2012.

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Yet another amendment to CITA

A Bill seeking to amend the Companies Income Tax Act Cap C21 LFN 2004 to, among other things, make for tax incentives for economic growth and creation of employment opportunities is currently under consideration by the National Assembly.

The Bill, if passed into law, will grant a 10 year tax holiday to any new company established in an area with no electricity, water or tarred road. Where such facilities provided by government are located at least 10 kms away the company will be entitled to investment allowance ranging from 20% to 100% of expenditure incurred in providing such facilities.

It is not clear if the investment allowance will be in addition to the tax free period or they are mutually exclusive. Also it is not clear if tax free period will be based on the unavailability of at least one or all of the facilities.

Also the Bill seeks to increase the tax holiday of a new company going into mining of solid minerals, or gas utilisation from the current 3 and 5 years to 5 and 7 years respectively.

The proposed amendment, subject to necessary fine-tuning if it must go through, is most likely a welcome development for some investors and taxpayers although there is no empirical evidence of any direct relationship between tax incentives and economic growth or employment generation.

Given the federal government’s policy direction to move away from selective tax incentives, because they create uneven playing field, the proposed tax incentive should perhaps apply to all companies in Nigeria. The reason for this, which is not far-fetched, is that many companies do not rely on water or electricity provided by government. Also in many cases roads are in a terrible state that they are as bad as un-tarred. Consequently, this means virtually all companies operating in Nigeria (including those located in cities) should be eligible for the incentive.   In fact, in many home individuals generate their own electricity and water. May be such individuals should also enjoy a tax free holiday from personal income tax.

Download CITA Amendment Bill 2012

Tax Alert: May 2012

On 12 December 2011, the Federal Inland Revenue Service (FIRS) pursuant to its powers under Section 61 of the FIRS Establishment Act (FIRS Act) ), with the approval of the Minister of Finance, issued the Tax Administration (Self Assessment) Regulations 2011 which was officially gazetted on 19 December 2011.

The regulation seeks to modify the existing self assessment procedure where taxpayers are required to compute their tax liabilities, file and make payment by the due date or in approved instalments.

Learn more by downloading the May Tax Alert.

Tax Calendar – May 2012

Welcome back and hope you had a restful Workers’ Day.

Below is the tax calendar for May 2012 to assist you with tax compliance especially tax filing obligations and payment deadlines.

Download Tax calendar_May 2012