Reactions have continued to trail Federal Government’s tax incentives strategy as a new way for funding road development in the country.
In the new Road Trust Fund Structure (RTES) set up by the government, it agreed to offer some years of tax relief to companies that agreed to fund the construction of failed federal roads.
However, several experts who spoke on the matter over the weekend, picked holes on issues bordering on transparency and chances of policy summersaults on takeoff of the scheme.
Besides, many observers argue that if the federal government gives tax relief to a company that has agreed to work on a particular road, will the same company enjoy similar reliefs from states and local governments because taxes are graded into federal, states and local governments.
The first pilot trial of the new policy is with Dangote Group who is currently working out understanding on the reconstruction of Apapa-Oshodi Expressway using the new tax relief policy.
Recalls that the Minister of Finance, Mrs. Kemi Adeosun, had last week said the initiative would allow the private sector to get involved in road construction in exchange for tax credit.
She said the initiative would accelerate the provision of federal roads by allowing private sector operators to collectively fund road provision in exchange for tax credits.
“We have already consulted with the private sector in the development of the RTF and some companies have identified roads they wish to reconstruct and are organising their funding. However, this scheme is designed such that financial intermediaries will be promoting road trust fund projects and soliciting commitments from interested companies.”
She said “Under the tax relief scheme, companies will be allowed to recover 100 per cent of costs incurred on road infrastructure as a tax credit against total tax payable, including up to 10 per cent for cost of funds”.
The Minister further noted that the tax relief would allow for cost recovery within a year instead of three years for economically disadvantaged areas, saying “When completed, the roads would be handed over to the Federal Government, which might decide to toll the roads in accordance with the National Tolling Policy (NTP)”.
Adeosun also explained that the Ministry of Power, Works and Housing, would be responsible for approving the road designs, monitoring all approved RTF projects by managing costs and timelines as well as ensuring that equal development across Nigeria by rebalancing the federal budget, where necessary.
Adeosun added that the government expected the impact on revenues to be neutral because it was tightening the tax code.
She said that was why a limit had been placed so that no company could apply and use more than 50 per cent of the tax within a year for the scheme.