Business Hilights
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Transparency weakening companies’ appetite on tax relief for road repairs

More reactions have continued to trail last week’s new road development funding strategy introduced by the federal government.

It would be recalled that the Federal Executive Council had on Thursday last week, approved the establishment of the Road Trust Fund Structure (RTFS) for the country.

According to the plan, government has agreed to offer some years of tax relief to companies that agreed to fund the reconstruction 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.

Business Hilights recalls that the Minister of Finance, Mrs. Kemi Adeosun, had told State House correspondents after last week’s Federal Executive Council meeting presided over by President Muhammadu Buhari that the initiative would allow the private sector to get involved in road construction in exchange for tax credit.

According to him, “It is a form of Public-Private Partnership that will accelerate the provision of federal roads by allowing private sector operators to collectively fund road provision in exchange for tax credits. This will complement the Federal Government’s budgetary allocation to roads.

“Private sector participation is being incentivised through a tax credit scheme that enables all participating companies to claim tax relief based on the amount of capital contribution (on a pro-rata basis).

“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.

All costs and contractors would be scrutinised and approved by the Bureau of Public Procurement in line with legal requirements.

“This will ensure that costs are not inflated and that unqualified contractors are not used for the projects,” she stated.

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.

“A company doesn’t have to be active in that area, so a bank, oil company, or service company could get involved. We are really trying to widen the pool of funds for road construction,” Adeosun said.