Tax Talk:The Executive Order 007
YBTC News—Infrastructural development in no doubt contribute to economic growth of every nation. The impacts of good road networks in our infrastructural development cannot be overemphasized. However, while many roads have been tagged death traps, government have continuously demonstrated the willfulness to alter the norm. But huge national debt and expenses constitute a constant clog on the government desire to make death traps become motorable roads.
The African Development Bank (AfDB) estimated the Nigerian cumulative infrastructure financing needs to hit $3 trillion by 2044 or about $100 billion annually, which is about four times the size of the nation’s annual budget.
Issue of finance therefore erects a Chinese wall between the desire and reality of having motorable roads in Nigeria Responding to this challenge, President Muhammadu Buhari on 25th January 2019, signed the Executive Order No. 007 on Road Infrastructure Development and Refurbishment Investment Tax Credit Scheme (hereinafter referred to as “the Scheme”).
Esteemed fellow tax minds, on this edition of Tax Talk With Abolarin Muhammad, we will be giving you insights on the Executive Order 007 and its prospects.
What is Executive Order 007?
The Executive Order 007 is a Federal Government Policy on Road Infrastructure Development and Refurbishment Investment Tax Credit Scheme. The Scheme is a public-private partnership aimed at road infrastructure development. It enables private companies fund the construction and refurbishment of eligible roads in Nigeria.
Consequently, participants in the Scheme will get the fund they expended on the road project back by way of tax credits, claimable against Companies Income Tax (CIT) payable.
What this means in simple terms is that private companies can undertake or elect to construct road using their taxable income as the fund and in return get exemption from corporate taxation equivalent to amount used for funding the road. This gives private companies the liberty to fix road networks that are useful for their business operations and which will thereby ultimately benefit the Nigerian populace.
The Scheme will be in operation for a period of 10 years starting from the date of commencement. Although, the date of commencement is not specified in the order. Nevertheless, the date the order was signed can be taken as the date of commencement. By implication the scheme will be in operation from 2019 – 2029.
Eligibility for Participation
The eligibility to participate in the Scheme is open to every Nigerian companies (with the exception of corporation sole) and institutional investors. However, it is not all roads that they can elect to construct. The roads they can construct refers to any road approved by the President as eligible for the Scheme on the recommendation of the Minister of Finance and as duly notified to participants and published pursuant to the Order.
The implementation and administration of the Scheme is vested in a special management committee. The committee is made up of representatives from relevant Ministries and agencies, including Federal Inland Revenue Service (FIRS) and chaired by the Minister of Finance. The committee is the body saddled with the sole duty of issuing Road Infrastructure Tax Credit to eligible companies or their representatives.
It is apparent that the scheme is right peg in the right hole and if its implementation and goals see the light of the day, it will in no doubt translate to tremendous road infrastructural development with myriads of positive impacts on our economy.
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