The Federal Government lost the amount of N6trn due to various tax incentives and exemptions under the Pioneer Tax Incentive Plan in 2021.

The Minister of Finance, Budget and National Planning, Ms. Zainab Ahmed, said this during the public presentation of the 2023 budget.

The Pioneer Incentive Scheme is a Federal Government incentive that basically exempts companies from income tax.

The incentive is also known as a tax break and is generally seen as an industrial measure meant to stimulate investment in the economy.

This means that companies with pioneer status do not have to pay taxes for a certain period of time that allows the company to establish itself. This tax exemption can be total or partial.

Products or companies eligible for this pioneer status are industries or products that do not yet exist in the country; the existing industry does not satisfy the required needs or meet the expected goals; and any industry or product for which there is a favorable development prospect.

Ahmed said the Federal Government would phase out the Embedded Business Income Tax, also known as Pioneer Tax Incentives, for industries that had grown in the 2023 Allocation Act.

But he noted that while phasing out the incentive will not be a popular decision, it became imperative to ensure that infant industries, especially the information technology sector, would benefit from the policy.

She stated: “We are phasing out the Integrated Corporate Income Tax incentives for mature industries and maybe people will just understand when they see trailblazing taxes.

“We have tax provisions that go back to 1958 or something like that. So there are some industries from that schedule at that time that were classified as babies and we’re saying they’ve grown up and need to get out. And we need to bring in new infant industries to benefit.

“Such industries are industries that are now growing in the IT sector that didn’t exist and that need these opportunities. And we are glad that the Business Creation Law has also emphasized that.

“So, we will get out of some industries from the pioneer tax incentive. We are aware that this is not going to be very popular, but it is a must for us.

“As of 2021, the government’s fiscal spending was N6trn. That is, N6trn in revenue in terms of different types of tax incentives, tax holidays, import duty exemptions, different types of exemptions, and revenue.

“When we appreciate the need to provide incentives to encourage the industry, we have to create a balance that we are not giving too much without getting too much.”

The minister explained that the projections for 2023 deviated a little from the National Development Plan 2021-2025.

He stressed that this was because the government had to adjust to current economic realities, as well as the changed medium-term outlook.