The Executive Chairman of the Federal Inland Revenue Service, Zacch Adedeji, stated on Tuesday that it is challenging to quantify revenue lost to tax expenditures due to poor data availability across relevant government agencies.
He explained that tax incentives are not adequately assessed in terms of their actual economic benefits, making it difficult to determine their true cost and leaving room for unverified tax expenditure figures in various sectors.
This was disclosed in a statement by Adedeji during a keynote speech at the 2025 Tax Expenditure Workshop, organized by the Tax Expenditure Management Unit of the FIRS Corporate Services Group in Abuja.
The event, themed ‘Tax Expenditure and Its Effect on Government Revenue’, focused on assessing whether tax incentives are truly fostering economic growth or subtly eroding the nation’s revenue base.
Financial experts describe tax expenditures as “revenue lost due to tax law provisions that allow special exclusions, exemptions, or deductions from gross income, or provide special credits, preferential tax rates, or tax deferrals.”
It was earlier reported that the government has been conceding substantial revenue, mainly through the Pioneer Status Incentive scheme, to encourage investment from companies looking to set up in the country.
Despite plans to abolish and thoroughly review the incentive, the special tax exclusion has reportedly resulted in an estimated ₦8 trillion in lost revenue annually for the government.
The FIRS chair, represented by Bolaji Akintola, the Coordinating Director of the Corporate Services Group, explained that the policy was intended to support key sectors like industrialization, job creation, innovation, infrastructure, and foreign exchange earnings.
However, the absence of proper data management and impact assessment has made it challenging to accurately evaluate the true costs and benefits of these incentives.
He said, “Tax expenditures have serious direct and indirect impacts on the citizenry, especially based on equity and fairness. We all know that the Fiscal Responsibility Act 2007 mandates that agencies of government provide an evaluation of the budgetary and financial implications of any proposed tax expenditure each year.
“Tax expenditures, like direct expenditures, affect the government budget, as they are expenditures that are spent indirectly by the government through tax exemption, tax deduction, tax offset, concessional tax rate or deferral of tax liability. It is granted for several reasons, among which are encouraging industrialisation, creation of employment, provision of infrastructure, foreign exchange earnings, positive balance of trade, encouragement of innovations and reaching the underserved locations.
“It has been argued that the government is losing revenue through tax incentives, which have been difficult to quantify due to limited data availability.
“In granting tax incentives by the government, there are expected benefits to be derived from the entities that enjoy these incentives, such that if adequately quantified when analysing the tax expenditures in terms of socio-economic impact, it will show that the actual financial cost to government vis-à-vis benefits will be minimised, and a positive developmental curve or growth curve will be observed.
“It is the lack of this adequate monitoring tool on impact assessment that gives room to the ’IFs’ and ’BUTs’ which create room for these unverified tax expenditure figures in different quarters.”
Adedeji further expressed concern that many stakeholders operate in isolation, without a central coordinating framework for tax incentives. He also pointed out the lack of a dedicated tax committee in the National Assembly.
Other challenges he identified include conflicting incentive schemes, base erosion and profit shifting, and tax policies driven by political motivations.
To resolve this, the FIRS boss disclosed that the service has empowered its Tax Expenditure Management Unit to evaluate and monitor all tax incentives, adding that the unit is now supported by the integrated digital tax administration system (TaxPro Max).
“While some abuses have been noticed in tax expenditure management, there is also the question about the continued relevance of some of the tax incentives. It is, therefore, important that innovative strategies are adopted to achieve efficiency in tax expenditure management,” he added.
The FIRS Executive Chairman called for amendments to the laws governing tax expenditures, emphasizing the need to prevent abuse and ensure the system remains adaptable to global reforms, such as the OECD’s Pillar II global minimum tax rule.
He also advocated for a centralized framework to regulate and monitor tax incentives, highlighting the importance of consistent cost-benefit analyses to determine which incentives should be maintained.
He added that a centralized framework would help eliminate duplication and overlap among ministries, departments, and agencies.
While the FIRS is currently focused on extracting and computing tax expenditure data, Adedeji noted that the responsibility for assessing their impact still primarily rests with administering agencies, such as the Nigerian Investment Promotion Commission, the Nigeria Export Processing Zones Authority, and the Oil and Gas Free Zones Authority.
He also stressed the importance of stronger inter-agency collaboration and emphasized the need for regular assessments of the ongoing relevance and impact of tax incentives on national development.
“We believe that data is life in tax expenditure reporting. That is why the service will continue to collaborate with the ECOWAS, IMF, World Bank, and the Addis Tax Initiatives to build a robust tax expenditure value chain,” he stated.
