States, LG's Looses Over N304 billion to FG, Dangote Cement awarded tax credit certificate worth N22.3 billion

States, LG's Looses Over N304 billion to FG, Dangote Cement awarded tax credit certificate worth N22.3 billion 

STATES and local governments in the country have lost billions of naira as revenue from the federation account sequel to the implementation of the Federal Government Road Infrastructure Tax Credit Scheme (RITCS). The RITC, which is meant to facilitate the construction and rehabilitation of federal roads, encourages companies to commit their resources to the construction of 

new roads or rehabilitating old ones with the assurance that such expended resources would be recouped from their Companies Income Tax (CIT).

However, according to the constitution, CIT is jointly owned by the three tiers of government. While the Federal Government, in consonance with the current sharing formula, takes 52.68 per cent, the 36 states have 26.72 per cent, while the 774 local government councils take 20.60 per cent.

But with the coming of RITCS, the Federal Government has deprived both states and LGs their shares of the CIT that should have been paid by some companies.

Findings revealed that the Federation Accounts Allocation Committee (FAAC) reported significant decrease in CIT in July, August and September 2021.

Already, over N304 billion has been lost by states and LGs to this scheme as about 12 companies have been given the goahead by the Federal Government to construct federal roads in lieu of CIT payment.

Dangote Cement Plc has been awarded a tax credit certificate worth N22.3 billion to construct the Apapa-OworonshokiOjota road in Lagos and the Lokoja-Obajana-Kabba road connecting Kogi and Kwara states.

Similarly, the Nigerian National Petroleum Corporation (NNPC) has been given the nod by the Federal Government to construct 21 roads worth N621.23 billion over the next three years.

Between the road projects to be executed by the NNPC and the ones to be handled by Dangote Cement, states and local government councils will lose N304.5 billion revenue from CIT.

This is because the cost of projects being handled by the two companies comes to N643.53 billion. With the current sharing formula, 47.32 per cent of this sum, amounting to N304.5 billion, belongs to states and local government councils.

In addition, MTN is handling the 110km Enugu-Onitsha road in Anambra State, Transcorp Group has been given the nod

to construct the 13.5km Oyinbo-Izuoma-Mirinwayi-OklamaAfam Road in Rivers State, Access Bank is to construct Oniru axis of VI-Lekki circulation road in Lagos State, while GZI Industries is to reconstruct the 3.7km Umueme Village Road in Obingwa Local Government Area of Abia State.

BUA Group has been given the right to construct Bode Saadu road and bridges; Kosubosu in Kwara State; Lafiagi road and President Muhammadu Buhari

bridge, Bachita Kwara State; Eyenkorin road and bridge, Offa in Kwara/Osun States, and Bukuro road and bridges, Okuta in Kwara linking to Benin Republic/Osun State. Mainstream

Energy Solution is to construct Malando-Garin Baka BakaNgaskl-Wara road, in Niger/Kebbi State. The company is also

to construct the Sabon Gari Yuni- Shagwa-Auna Road in Niger State as well as the rehabilitation of Mokwa-Nasarawa Road in Niger State.

Globacom is to reconstruct the 64km OtaIdiroko road in Ogun State.

President Muhammadu Buhari had, on January 25, 2019, signed Executive Order No. 007 on Road Infrastructure Development and Refurbishment Investment Tax Credit Scheme to address the overwhelming road infrastructure challenge of the country. The scheme seeks to encourage Public-Private Partnership intervention in the construction and refurbishment of road projects in Nigeria. With this Order, private businesses can fund the construction or refurbishment of roads and utilise the project cost as a tax credit against their future Companies Income Tax (CIT) liability, until full cost recovery is achieved.

The essence of the Order is to leverage private sector funding for the construction and refurbishment of eligible road infrastructure projects, focus on the development of the eligible roads in a way that creates value for money through private sector discipline and to guarantee participants in the scheme timely and full recovery of funds expended on the construction or rehabilitation of the eligible roads. The eligible roads are to be approved by the President, on the recommendation of the Minister of Finance and published in the Official Gazette of the Federal Republic of Nigeria.

Business outfits that can participate in the scheme include a company or corporation, other than a corporation sole, established under the Companies and Allied Matters Act, 2020 (CAMA), companies operating through a special purpose vehicle (SPV) registered by a fund manager duly registered with the Securities and Exchange Commission and set up solely as an infrastructure fund; and institutional investors such as pension fund administrators, collective investment schemes and investment banks.

The scheme is to run for 10 years. The President, in signing the Order, relied on the powers conferred on him by the Constitution as well as Section 23 (2) of the Companies Income Tax, which states that the President may exempt “by order (a) any company or class of companies from all or any of the provisions of this Act; or (b) from tax all or any profits of any company or class of companies from any source, on any ground which appears to it sufficient.”

Since 2019 when the Order came into existence, the list of companies signing on to the RITCS has been steadily increasing because of the inherent benefits.

According to the Order, apart from participants being entitled to tax credits against their future Companies Income Tax to the tune of the total project cost incurred in the construction or refurbishment of the eligible road, recovery of the approved total project costs shall be subject to the utilisation

of a maximum annual tax credit of 50 per cent of the total accessed CIT for each year of assessment. The participating business will also be entitled to a single non-taxable uplift at the prevailing Central Bank of Nigeria Monetary Policy Rate plus two per cent of the cost of project.

In addition, participants that engage in the construction or refurbishment of roads in areas designated by the President as ‘Economically Disadvantaged Areas’ are entitled to utilise an annual tax credit that covers up to 100 per cent of the total

accessed CIT for each year of assessment. Companies are also allowed to carry forward any unutilised credit within the year of assessment to subsequent tax years until the credit is fully utilised.

Similarly, the Road Infrastructure Tax Credit can be transferred in part or as a whole by a participant to a new beneficiary, while the Executive Order provides that the tax credit qualifies as an asset in the participant’s or beneficiary’s financial records. The tax credit is tradable on any stock exchange in which it is registered.

Credit Source: Nigeria Tribune