The Executive Chairman of the Federal Inland Revenue Service, Zacch Adedeji, has identified poor data availability across relevant government agencies as a major reason for loss of revenue via tax incentives.
The Chairman who stated this on Monday, while delivering a keynote speech at the 2025 Tax Expenditure Workshop organised by the Tax Expenditure Management Unit of the FIRS Corporate Services Group in Abuja. said this is because tax incentives are not properly weighed against their real economic benefits, which makes it hard to know their true cost and creates room for unverified tax expenditure figures in different quarters.
According to financial experts, tax expenditures as “revenue forgone attributable to provisions of the tax laws which allow a special exclusion, exemption, or deduction from gross income or which provide a special credit, a preferential rate of tax, or a deferral of tax liability.”
Despite plans to abolish and comprehensively review the incentive, the special tax exclusion has reportedly cost the government an estimated N8tn in lost revenue annually.
The FIRS chair, who was represented by the Coordinating Director, Corporate Services Group, Bolaji Akintola, said the policy directive was designed to support critical sectors such as industrialisation, employment creation, innovation, infrastructure, and foreign exchange earnings.
He said, “Tax expenditures have serious direct and indirect impacts on the citizenry, especially based on equity and fairness. We all know that the Fiscal Responsibility Act of 2007 mandates that Agencies of government provide an evaluation of the budgetary and financial implications of any proposed tax expenditure each year.
“Tax expenditures, like direct expenditures, affect the government budget as it is an expenditure that is spent indirectly by the government through tax exemption, tax deduction, tax offset, concessional tax rate or deferral of tax liability. It is granted for several reasons, among which are to encourage industrialisation, creation of employment, provision of infrastructure, foreign exchange earnings, positive balance of trade, encouragement of innovations and reaching the underserved locations.
“It has been argued that the government is losing revenue through tax incentives, which have been difficult to quantify due to limited data availability. In granting tax incentives by the government, there are expected benefits to be derived from the entities that enjoy these incentives, such that if adequately quantified when analysing the Tax Expenditures in terms of socio-economic impact will show that the actual financial cost to government vis – a viz benefits will be minimised, and a positive developmental curve or growth curve will be observed.
“It is the lack of this adequate monitoring tool on impact assessment that gives room to the ‘IFs’ and ‘Buts’ which create room for these unverified tax expenditure figures in different quarters.”
Adedeji further lamented that many stakeholders operate in silos, with no central coordinating framework for tax incentives, and highlighted the absence of a dedicated tax committee in the National Assembly.
Other challenges identified include conflicting incentive schemes, Base Erosion and Profit Shifting, and politically motivated tax policies.
He noted that the Fiscal Responsibility Act 2007, which mandates all government agencies to evaluate the financial implications of proposed tax expenditures annually, is often poorly implemented.
To resolve this, the FIRS boss disclosed that the Service has empowered its Tax Expenditure Management Unit to evaluate and monitor all tax incentives, adding that the unit is now supported by the integrated digital tax administration system (TaxPro Max).
“While some abuses have been noticed in tax expenditure management, there is also the question about the continued relevance of some of the Tax Incentives. It is, therefore, important that innovative strategies are adopted to achieve efficiency in tax expenditure management,” he added.
