ABSTRACT
Tax incentives are deliberate reduction
in tax liability granted to investors to encourage particular economic units to
act in some deliberate way (eg invest more, produce more, employ more, exploit
more, save more, conserve less, pollute less and so on). They include
adjustments to tax policy aimed at lessening the effects of taxation on an
industry, a group of persons or the provision of certain services to investors.
These incentives are basically designed to attract new investment into the
country and to expand existing ones. Tax incentives are measures adopted to
motivate tax payers to respond favourably to their tax obligations. This helps
to encourage businesses for more investment, production, employment, savings,
less import and pollution. The beginning of tax incentive in Nigeria can be
traced to the Industrial Development (Income Tax Relief) Act 1971. Tax
incentives in Nigeria are provided in the laws in the nature of tax reliefs,
exemptions, allowances and deductions for the benefits of taxpayers. They play
significant roles in attracting investment decision than in the past years.
Apart from Nigeria, other countries both developing and developed use tax
incentives to attract, retain or increase investment in a particular sector,
stimulate growth in specific areas and assist companies or individuals carrying
identified activities. In Nigeria, the introduction of tax incentives
encourages foreign and domestic investment towards rapid industrialization and
creation of investment opportunities for entrepreneurs, helps in self –
reliance in local production of essential goods, provision of employment
opportunities, discourages the flight of capital and provides revenue payable
to the government. While tax incentive mechanisms made investing in Nigeria
more attractive, the effective use of these incentives to encourage investment
decision is hindered by some factors like corruption, dysfunctional legal
system, social insecurity, unstable power supply, poor means of transportation,
insufficient capital and activities of smugglers. Other than lack of
infrastructure, insecurity and the likes, some of the major policies
discouraging investment in Nigeria include the requirement in the Companies and
Allied Matters Act for a foreign company wishing to carry on business in
Nigeria to incorporate a Nigerian company for that purpose. Sometimes, the
nature and duration of business to be undertaking do not require incorporation
where resort can be made to a branch or representative office. There is also
the commencement rule under the income tax law which levies double taxation on
the profit of a start-up company. In addition, there is excess dividend tax
provision which penalizes a group of company and other entities that invest
their profits rather than distribute them. When such profits are subsequently
distributed, the company is made to suffer an additional 30% tax on the past
profits reinvested. Furthermore, the Companies and Allied Matters Act imposes
minimum tax on Companies where they have no taxable profits. This means that
the companies would have to pay taxes out of their capital. Companies also deal
with multiple agencies outside those required by the constitution. These can
however be tackled by constant monitoring of all tax incentives to ensure
effectiveness and prevent abuse, provision of stable electricity, adequate
infrastructure, consistent economic policies, transparency and proper
accountability on the part of tax administrators and taxpayers, less
restriction to the conditionality attached to tax incentives, removal of excess
dividend tax, minimum tax and the commencement rule. In this work, the writer
made an assessment of the legislative provisions and executive policies on tax
incentives in Nigeria and also made a critical review on how to solve the
defects associated with tax incentives in Nigeria. It is intended to shed more
light on the role of tax incentives in the economic development of our nation
and the need to adopt a more robust policy to attract more investment in the
country. The writer will adopt a comparative analysis of the statutes on tax
incentives and also resorted to journals, case laws, text books, internet and
international instruments. The conclusions will be drawn based on the research
and the writer goes ahead to recommend that there is need for Nigeria to
embrace the practice in other jurisdictions with relevant modifications.
mso-fareast-font-family:"Times New Roman"">A.
Title Page.
mso-fareast-font-family:"Times New Roman"">B.
Certification.
mso-fareast-font-family:"Times New Roman"">C.
Approval Page.
mso-fareast-font-family:"Times New Roman"">D.
Dedication.
mso-fareast-font-family:"Times New Roman"">E.
Acknowledgement.
mso-fareast-font-family:"Times New Roman"">F.
Abstract.
mso-fareast-font-family:"Times New Roman"">G.
Table of Contents.
H.
TABLE
OF CASES.
·
Seven Up Bottling Company vs. Lagos
State Internal Revenue Board [2000] 3 NWLR p. 565-591
·
A. G. Lagos State vs. Eko Hotels Ltd.
& FBIR (2009) 1 TCRN
·
Aberuagba vs. A.G. Ogun (1995) NWLR (pt.
3)385
·
Addax Petroleum Development (Nig) Ltd
vs. FIRS (2012) vol. 7 TCRN
·
Alhaji Ahmadu & Anor vs. The
Governor of Kogi State
·
Alhaji Audu Bado vs. Commissioner of
Revenue (1972) 4 S. C.
·
Aluminium Industries Aktien Gesellschaft
vs. FBIR
·
Arbico Limited vs. FBIR (1986) NCLR, 150
·
Attorney General of Lagos State vs. Eko
Hotels (unrep.) CA/L/428/2005
·
Authority vs. Regional Tax Board,
Attorney-General of the Western State of Nigeria and Adelaja [1967] NCLR
452-464.
·
Brandy Syndicate vs. I.R.S. (1921) KB 64
·
Cadbury vs. FBIR (2009) 1 TLRN 1
·
Cape Brandy Syndicate v. IRC (1921) 2
K.B.
·
Chapman vs. Chapman,
·
Chester Motors vs. Koledo (1986) 148 vt.
357
·
Chief Obafemi Owolowo vs. Alhaji Shehu
Shagari & Ors (1979) 6-7 S.C. 51
