A tax holiday is temporary reduction of tax. Government usually create tax holidays as an incentive for investment to thrive which will invariably boost the economy. Also, government can decide to relieve some individual earning income below a particular ratio.
The International Monetary Fund has advised the Federal Government to urgently revisit tax holidays and exemptions given to companies. It specifically urged Nigeria to implement a reform that would see it phase out tax holidays and exemptions eroding the Company Income Tax base.
|Amine Mati: Mission Chief for Nigeria|
The Senior Resident Representative and Mission Chief for Nigeria, Africa Department, IMF, Mr. Amine Mati, stated that there is also a need for Nigerian policymakers to move beyond voluntary compliance measures in tax matters in order to mobilise non-oil revenue and increase the fiscal space.
The IMF chief spoke while making a presentation at a forum organised by the Chartered Institute of Bankers of Nigeria.
A former President of the Chartered Institute of Taxation of Nigeria, Chief Mark Dike, described tax as a compulsory levy imposed by the government on individuals and companies for the provision of public goods and services.
As a result, he said he was of the opinion that the government should create an enabling environment and provide general incentives for companies, adding that tax waivers and holidays could create a lack of level playing field.
According to him, the government can reduce the tax rate to enable every company and individuals to pay.
Tax as a governance principle is not only for government to collect taxes from individuals and businesses. If government is unable to provide social amenities immediately, then, government can decide to find companies to provide the amenities and give out tax waviers as incentives to them.
An economic analyst and Chief Executive Officer of Cowry Asset Management Limited, Mr. Johnson Chukwu, said there was a need for the Federal Government to overhaul the entire tax holiday system, especially in the pioneer sectors, because the current system allowed corruption.
According to Chukwu, there is a need to still give tax holidays and exemptions but it has to be only for a short period on an initial investment.