Abuja – The Federal Inland Revenue Service (FIRS) and the Institute of Chartered Accountants of Nigeria (ICAN), Monday, disagreed on the plans to increase pioneer status for new companies.
The two bodies differed in their views on the policy which would make the affected companies enjoy tax exemption for 10 years.
See Also Fresh FIRS Recruitment: Ensure Fairness, Equity, Rep Tells FG
Tax exemption is granted for a period of five years at present.
The occasion was the public hearing by the Senate on a bill seeking to alter the Company Income Tax Act (CITA).
While ICAN supported the proposal, the FIRS stoically opposed it.
Babatunde Fowler, Chairman of FIRS, argued that giving further tax incentive to companies would lead to loss of revenue for the nation just as he insisted that the current provision in CITA, which gives five-year tax holidays to new industries, is sufficient.
Using the telecommunications industry to buttress his argument, Fowler submitted that five years is “more than sufficient” for investors to recoup their profit.
“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,” Fowler told the Senate Committee on Finance, which organised the public hearing.
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, claiming that this would encourage entrepreneurs and existing companies to expand their operations.
The Institute, however, 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.’
In his opening remarks, Senate President Bukola Saraki said the bill would not only boost employment activities in the rural areas but also provide employment opportunities for the teeming unemployed youths.
See Also Lagos Will Produce First Female Governor Some Day – Ambode
He said: “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.”