Oil, manufacturing sectors got highest tax exemption in 2022 – Report

Bisola David
Bisola David
Bill for tax crimes commission passes second reading

The Federal Government gave the greatest tax exemption to operators in the country’s oil and manufacturing sectors in 2022, totaling N1.42 trillion.

According to The Punch, this is based on a sectoral tax exemption breakdown acquired from the Medium Term Expenditure Framework and Fiscal Strategy Paper 2024-2026.

According to the report, income forfeiture to 21 industries was part of steps to preserve investment from international competition, industrial estates, and freedom of profit and capital transfer, among other things.

Tax exemption is the waiver of a national tax, fee, or charge, and suppliers of exempt items cannot charge or claim output VAT; no VAT is chargeable on the delivery of exempt goods or services.

According to the revised MTEF/FSP, the government lost N739.74 billion in income as a result of tax expenditure on exempt supplies, while 675.83 billion was lost due to tax expenditure on zero-rated supplies.

According to the research, “Zero Rating is the total waiver of taxes on goods and services, primarily due to their societal importance or consumption in foreign jurisdictions.” As a result, no VAT is payable on the supply (it is charged at 0%). Input VAT is claimed by suppliers of zero-rated products or services.

“Tax expenditure, with respect to VAT, therefore, is the revenue foregone due to exemptions, zero-rating of certain goods and services as well as exemptions from payment by certain bodies or persons.”

Oil production, manufacturing, agriculture, retail and trading, mining, professional services, pharmaceuticals, transportation, banks and financial institutions were among the top ten sectors with N1.4tn in tax exemptions, according to a sector-by-sector analysis.

Other industries that received waivers included bottling businesses, real estate and investment, printing, petroleum, textile, construction, and automotive assembly.

The fiscal policy also stated that N25 billion in exemptions were granted to develop infrastructure, accounting for around 2% of overall import VAT tax spending.

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