- As Mozambique cuts key lending rate to 22.5%
Mr Taiwo Oyedele, a tax expert, says only tax incentives to industries without addressing other challenges will not bring about the desired economic growth in Nigeria.
Oyedele, Head, Tax and Regulatory Services at PricewaterhouseCoopers (PwC), made the assertion in an interview with the News Agency of Nigeria (NAN) in Lagos on Friday.
He said that the task in Nigeria should be how to attract investors based on the enabling environment and viability of the country’s business climate rather than luring them with Pioneer Status Incentive (PSI).
The Federal Executive Council (FEC), had at its last meeting, approved additional 27 industries to enjoy the Pioneer Status Incentive to encourage and attract investments into critical sectors of the economy,
Oyedele described pioneer status incentive as a tax holiday granted to industries not necessarily engaging in pioneering activities, but considered not mature and requiring support to grow.
The PSI exempts companies which meet certain requirements from the payment of company income tax for an initial period of three years and subject to additional one to two years renewal.
Oyedele said that the problem of the manufacturing sector was not that of tax holiday, but many other disincentives hindering their growth and competitiveness.
“There is the challenge of power, quality of products, trade tariffs, dumping of substandard foreign goods, lack of infrastructure and the perceived harsh business operating environment.
“Many of the companies that left Nigeria, such as Dunlop, left because they cannot make profit. If you cannot break even and I give you pioneer status, you are only wasting your time.
“The challenge is how to make Nigeria’s manufacturing sector viable because they are the real engine of growth, they generate employment, add to Gross Domestic Product (GDP) and reduce dependence on importation.
“While pioneer status might help a little, it does not solve 10 per cent of the problem,” he said.
The tax expert said that the country should get to a point where the number of eligible industries for pioneer status would be reducing.
“We really need to narrow it down to things that are more important like power generation, technology and innovation; those kinds of fundamental things that can transform the economy.
“May be, we need to have our own form of Google in Nigeria and tax holidays would help this form of innovations,” he said.
Some of the industries added to the list are into mining and processing of coal, processing of cocoa, tanning and dressing of leather, e-commerce service, manufacture of machinery and manufacture of steam generators.
Others are into music production, video and television programme, photography, mortgage backed securities under Investment and Securities Act, waste treatment, disposal and material recovery.
In the meantime, Mozambique’s Central Bank reduced its benchmark lending rate by 25 basis points to 22.5 per cent, the regulator’s website showed on Friday.
The Bank of Mozambique said falling consumer price inflation and a firmer currency against the dollar had prompted the decision to reduce rates.