The Lagos Chamber of Commerce and Industry (LCCI) has requested that the Federal Government amends the Petroleum Profit Tax Act (PPTA), with the same provisions of the Petroleum Industry Act (PIA) section 104. The remark was made by the Chamber as regards the 2022 Finance Bill approved by the National Assembly. The Bill is yet to be approved by the President.
In recognition of the potential impact of the 2022 Finance Bill on the operations of its members in various sectors of the economy, the Director General of the Chamber, Dr. Chinyere Almona, highlighted that LCCI reviewed the Bill and has made its recommendations.
Almona suggested that the government reposition the industry by a sternly implemented PIA to open the door for new investments and also encourage indigenous enterprises to reflate the sector with necessary investments in light of the divestments by some IOCs from the oil and gas sector.
According to her, gas flare-out projects should be given financial incentives to guarantee that the resource is monetized for Nigeria’s advantage. The 30 percent CIT on all oil and gas businesses was another suggestion made by the DG. She stressed the requirement that before Finance Bills are approved by the National Assembly, they must be presented for thorough stakeholder participation.
Regarding the 2023 budget, the DG made a commitment that the Chamber will keep working to mobilize the private sector to support the execution of the 2023 Federal Budget. “Once revenue goals for the budget are met, MDAs and Government Owned Enterprises (GOEs) can step up their efforts to mobilize income in an environment that fosters the growth of the private sector.”
She urged the government to continue its current efforts to realize crude oil production and export targets by developing an investment-friendly oil and gas industry; arguing that Public-Private Partnerships (PPPs) are the best models to accelerate the pace of the country’s infrastructural development. This will help the country achieve the laudable goals of the 2023 Budget.
According to her, recent statistics reveal that Nigeria has struggled to attract investments into the oil & gas industry and that investments in the sector have declined significantly in the last 7 years. “The operations overheads of oil and gas companies remain above 40% above the global benchmark. In line with FGN priorities and ongoing initiatives to incentivize gas production, several sections of the PIA clearly show the determined efforts by the government to limit gas-flaring and contain very steep penalties.
“Also, gas flare fees/costs are treated as a penalty and as such a non-tax-deductible item. And oil and gas companies in Nigeria have reduced flaring by 70% since 2000 while nearly doubling overall gas production and commercialized volumes in four-folds.
“Through 2022, the oil sector’s share of the GDP was just about 5%, but it is responsible for over 85% of foreign exchange revenues and over 50% of all government revenue. This implies that a responsive regulatory framework is necessary for this industry, in order to prevent disruptions to investments.
“The government can save about N6 trillion in tax expenditure (waivers, exemptions, and incentives given by the government) with the plan to remove some large businesses from the Pioneer Status incentives, according to the Minister of Finance, Budget, and National Planning’s presentation of the 2023 Budget. Since there are innovative ways to save some tax expenditures, we recommend the government to proceed cautiously while raising tax rates so that government revenue increases in 2023. There won’t be a loss of income if rates remain as they are.
“The Tertiary Education Tax (TET) rate was recently raised from 2% to 2.5%, thus the chamber advises keeping it at that level. According to the research that is available, at the suggested rate of 3%, Nigeria’s corporate income tax rate would increase to around 36%, making it one of the highest rates in the world.”
