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Nigeria Police Trust Fund tax disincentive for companies—Experts

Massive condemnation has continued to trail Police tax; another corporate tax regime coming on the heels of the Nigeria Police Trust Fund (Establishment) Act, 2019 was signed into law June 24, 2019 and will be in force for a six-year period.

Business Hilights gathered that the act will among other things, require corporate organisations to part with 0.005 per cent of their net profit to fund the training of personnel, procure equipment, and instructional materials for police colleges, and boost welfare.

Several stoke analysts say even though the tax may be good for the purpose mentioned, it would be a disincentive to investors. Many would begin to shy away from stocks because they know their profits would be affected.

According to Abuja based development economist, Dr Odilim Enwegbara, “The police are not to be given a special financing from a tax like this because it has great negative implications for the investment climate in the country.

“Instead, the police must be funded from provisions in the federal budget and on personal basis like what some corporate bodies like the Dangote Group and others are doing, even providing them with cars.

Enwegbara argued further that others can take up the voluntary responsibility of building police stations and the like, but certainly not through this kind of taxation, saying “We have multiple taxation and this is a serious disincentive for investment in the country.”

“Another implication is that it would lead to high cost of transaction and loss of appetite among investors because of the multiplicity of taxes such as the education levy and the recently raised VAT.”

In his views, an economist at FSDH Merchant Bank Limited, Ayodele Akinwunmi averred that “Granted, the police need more funds to enable them to function. There are, however, other areas where the Federal Government can source money without over-levying existing tax compliant entities.”The Partner/Head of Tax and Corporate Advisory Services at PwC, Taiwo Oyedele, described the move as yet another addition to the myriads of taxes currently stifling growth in Nigeria.

“The issue is not just the amount companies have to pay; it is the fact that this extra burden will not solve the police funding problem. Education tax has not solved our education funding challenge. IT tax has not revolutionised technology in Nigeria. So, why does anyone think a police fund levy will be different?

Continuing, he added that the Police tax will raise disaffection and suggest that the federal government has lost sense of wealth creation and ease of doing business which the current administration had been crusading since 2015.

Already, legal luminary and Senior Advocate of Nigeria, Ferdinand Orbih has called for a “reversal” of the “obnoxious tax,” while Kano-based lawyer, Abubakar Sani, declared that “If I were to advise a company, I would counsel them to challenge it.”

Additional details on the tax according to Business Hilights investigations showed that the tax would consist of grants and donations from government bodies and non-governmental organisations, but exempts any income earned from investments by the fund and relieves the NPTF from any tax legislation applicable to companies or trust funds.

The regime of the tax which is six years is expected to rest from 2025 if the Act is not further amended to remain for life.