The Senate on Tuesday rejected the 2023-2025 Medium Term Expenditure Framework and Fiscal Strategy Paper (MTEF/FSP) which proposed a N6 trillion tax and import duties waivers proposed for in the N19.76 trillion 2023 budget which also contained a deficit of N12.4 trillion.
The Upper Legislative Chamber of the National Assembly also directed the Nigeria Customs Service (NCS) to carry out a downward review of the proposed waivers in the fiscal document by 50 per cent.
In addition, it asked the Federal Inland Revenue Service (FIRS) to critically look into the seeming abuse of tax credit by some companies.
The lawmakers said these when the Senate Committee on Finance and the Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed as well as heads of revenue generating agencies in the country met in Abuja, yesterday, to review the contents of the proposed 2023 – 2025 MTEF/FSP.
The finance minister had in her opening remarks, informed the committee that the N19.76 trillion proposed as the 2023 budget would have a deficit of N12.43 trillion because N6 trillion had been projected as tax and import duty waivers, while fuel subsidy would gulp a whopping N6 trillion.
Obviously uncomfortable with the Minister’s submissions, the Chairman of the Senate panel, Senator Solomon Adeola (APC Lagos West), told her that both the projected N12.43 trillion budget deficit and the N6trillion tax and import duty waivers should be critically reviewed downward before sending the proposals to the National Assembly for consideration and approval.
He also told the minister to look into the list of beneficiaries of the waivers for required downward review to N3 trillion in order to give room for the reduction of the N12.43 trillion deficit figure.
Adeola said, “The proposed N12.43 trillion deficit for the 2023 budget and N6 trillion waivers are very disturbing and must be critically reviewed.
“Many of the beneficiaries of the waivers are not ploughing accrued gains made into expected projects as far as infrastructural developments are concerned.
“The same goes for tax credit window offered by the FIRS to some companies.
“Billions and trillions of naira can be generated by government as revenue if such windows are closed against beneficiaries abusing them and invariably provide required money for budget funding with less deficit and borrowings.
“The NCS should help in this direction by critically reviewing waivers being granted on import duties for some importers just as the FIRS should also review the tax credit window offered some companies without corresponding corporate social services to Nigerians in terms of expected project executions like road construction.”
According to him, generally, the issue of waivers should be taken strongly by relevant authorities because Nigeria does not have the capacity for now.
“We cannot accommodate this N6 trillion tax waivers. It is in this wise that the committee frowns at the projected N12.41trillion budget deficit contained in the 2023-2025 MTEF/FSP and the alarming projection of ‘no provision for treasury-funded MDAs’ capital projects in 2023.
“This scenario is unacceptable and we must find ways to drastically reduce the deficit humongous figure.
“It is apparent that the borrowing trends cannot be allowed to continue unchecked and conscious efforts must be made to reduce budget deficits.
“Achieving these goals requires us to look inwards towards increased revenue generation, blocking of leakages and restraints on what are generally frivolous expenditures by MDAs, particularly the Government Owned Enterprises (GEOs).
“Our preliminary findings and directives to some of the agencies had led to payment of millions of naira into CRF in accordance with the Fiscal Responsibility Act 2007 and the 1999 Constitution.
“It is needless to say that these millions not paid to CRF contribute to the yearly huge budget deficits of the federal government.
“The investigation was also able to get some agencies to accept opting out of the federal budget altogether based on their internal revenue generating ability. Some of this findings are relevant to the proceedings of this 5-day interactive session.
“From the challenges thrown up against our economy in terms of the Russia-Ukraine war, the impact of crude oil theft, insecurity, and continuing infrastructure deficits, it is time for all to agree that it cannot be business as usual for government revenue and expenditures.
“We need to block all revenue leakages and misuse in MDAs as well as control expenditure to free funds for needed infrastructure development and provision of social services.”
However, the Minister said Finance explained that the exchange rate differential from N410- to N415/$ was projected in the fiscal document.
She said, “On subsidy, our assumption is that we could exit by June in 2023, so that we don’t leave burden for the next government and we do know that exiting has immediate impact on the citizens, but we hope that the parliament would see a better way we can exit.
“On issue of budget deficit, we are concerned and debt serving is consuming a huge revenue and hence we need to improve our revenue and reduce leakages inherent in our system.
“One of the ways to increase our revenue is to strengthen our monetary generating enterprises and to provide real sanctions to defaulters based on the fiscal responsibility act.
“On issue of issuing tax credit to companies: Tax credit are issued only when companies construct projects and the projects are certified and issued certificate by the Federal Ministry of Works.
“Government only announced the companies that expressed interest to construct some roads and Mr. President has given them go ahead to embark the process. The procedure is that they need to negotiate the bill of quantities and the design of the project with Federal Ministry of Works.”
The Chairman of the Federal Inland Revenue Service, Muhammad Mamman Nami , told the committee that tax credit was an important innovation of government which according to him had yielded positive results from September 2019 when it was introduced through the Executive Order 007 by President Muhammadu Buhari .
He urged the committee not to move in the direction of scrapping, saying it is only given to companies with evidence of projects executed.
He informed the committee that out of the N6.08trillion projected revenue from January to July 2022, the FIRS generated N5.59 trillion and assured that the N10.4 trillion projected for the year, would be achieved.
On his part, the Comptroller – General of the NCS, Col Hammed Ali (Rtd), assured the committee of an improved revenue generation in the 2023 fiscal year.
The interface continues today with the Governor of Central Bank, Godwin Emefiele and Group Managing Director of Nigerian National Petroleum Company Limited (NNPCL), Mele Kyari, expected to appear before the Committee.
