The Federal Government yesterday, took a bold step to boost investment into the economy by enlisting 27 industries, to enjoy the new Pioneer Status Incentive (PSI).
Pioneer Status Incentive is designed to reduce the cost of doing business in Nigeria by providing corporate income tax relief to qualifying companies making investments in industries designated as ‘Pioneer’.
The industries include coal, meat, poultry, cocoa, music production, publishing and distribution among others.
The list released in Abuja on Monday, came along with a set of new guidelines on how the new policy would run to ensure it adequately impacts on the economy, while especially ensuring it helps advance government’s ease of doing business drive.
Okechukwu Enelamah,the Minister of Industry Trade and Investment, who announced this, said these are part of measures to reduce the cost of doing business in Nigeria by providing corporate income tax relief to qualifying companies making investments in industries designated as “Pioneer”.
Analysts said last night, that it is a welcome development but raised concerns on the sustainability. Ayodeji Ebo, managing director, Afrinvest Securities limited, said government is trying to encourage investment by opening more sectors to foreign investors.
“It is a step in the right direction. It is not only positive that the government is planning to attract more foreign investment, but also growing the industries listed to enjoy the PSI”, Ebo told BusinessDay by phone.
Taiwo Oyedele, head of tax and regulatory services, PWC, said the most potent key to economic recovery and growth is investment.
“While adding new industries to the pioneer list of itself is not the silver bullet, it however can stimulate new and additional investment in the economy. This should be complemented by investment friendly policies and regulations to ensure overall ease of doing business”, Oyedele said in a mail response to BusinessDay.
Enelamah said “In Pursuit to the Industrial Development Income Tax Relief Act,No 22 of 1971, the Pioneer Status incentive grants companies making investments in quality industries and products, a tax holiday from the payment of company income tax for an initial period of three years, extendable for one or two additional years,” he stated, briefing the press.
The list of new industries added to the pioneer list by the government include: Mining and processing of coal; Processing and preservation of meat/poultry and production of meat/poultry products; Manufacture of starches and starch products; Processing of cocoa; Manufacture of animal feeds; Tanning and dressing of leather; Manufacture of leather footwear, luggage and handbags; Manufacture of household and personal hygiene paper products; Manufacture of paints, varnishes and printing ink; Manufacture of plastic products (builders’ plastic ware) and mould.
Others include: Manufacture of batteries and accumulators; Manufacture of steam generators; Manufacture of railway locomotives, wagons and rolling stock; Manufacture of metal-forming machinery and machine tools; Manufacture of machinery for metallurgy; Manufacture of machinery for food and beverage processing;
Manufacture of machinery for textile, apparel and leather production; and manufacture of machinery for paper and paperboard production.
The remaining are manufacture of plastics and rubber machinery; Waste treatment, disposal and material recovery; E-commerce services; Software development and publishing; Motion picture, video and television programme production, distribution, exhibition and photography; Music production, publishing and distribution; Real estate investment vehicles under the Investments and Securities Act; Mortgage backed securities under the Investments and SecuritiesAct; and Business process outsourcing.
Enelemah, at the press briefing, explained that the review of the list of pioneer industries and products was done to bring it in line with the economic realities of Nigeria and the Economic Recovery and Growth Plan (ERGP).
He further pointed out that, “The Federal Government is committed to encouraging and attracting investments into critical sectors of the economy which will significantly impact development and deliver key benefits to the country.
“These benefits include Economic Growth and Diversification; Industrial and Sectoral Development; Employment; Skills and Technology Transfer; Export Development; and Import Substitution,” he add.
In her remarks, the Executive Secretary of the Nigerian Investment Promotion Council (NIPC) Yewande Sadiku, stated: “The reforms have brought further clarity, predictability and process efficiency to the PSI regime. We will continue the reform process, as we plan to take the PSI application process online. We will also engage with relevant stakeholders with a view to updating the existing legislations.”
In September 2015, an administrative suspension was placed on the processing of PSI applications in to allow for a comprehensive review and reform of the incentive regime.
This was aimed at increasing transparency and process efficiency, better articulating the expected economic benefits, and improving the Federal Government’s ability to measure the impact of the incentive.
The new application guidelines provide information on the considerations for assessing new PSI and extension applications. It further outlines the application processes and timelines. It also details the ongoing obligations of beneficiaries.
The PSI grants companies making investments in qualifying industries and products a tax holiday from the payment of company income tax for an initial period of three years, with the possibility of an extension for one or two additional years.
Also as part of the guidelines, beneficiaries of the, Pioneer Status Incentive would be required to submit a performance report annually to NIPC, no later than 30 June of the following calendar year, providing actual audited financial information.
“Failure to submit the annual performance report for any year, shall result in the PSI certificate being cancelled; removal of the company’s name from the list of beneficiaries (posted on NIPC website); and notification to FIRS for collection of tax for the unexpired period as well as the period for which the report was not submitted,” Enelamah stated.
”NIPC shall reserve the right to proceed with the cancellation of a beneficiary’s PSI certificate following two reminders sent to the company’s registered address and/or correspondence email address provided in its application form or most recent annual performance report.
Pursuant to sections 8-25 of the Corrupt Practices and other Related Offences Act, 2000, the guidelines also warns of the federal government strict zero tolerance policy for corruption.
According to Enelamah, “Any proven act of corruption, gratification or inducement in violation of the said Act would be inimical to and jeopardise the prospect of being granted or retaining a PSI approval and certificate, in addition to being referred to the relevant agency of the FGN for investigation and possible prosecution.
Meanwhile, all fees are due within the time frame stipulated by NIPC. During the application process, failure to make fee payments promptly will affect the application process timeline.
Also during the pioneer period, “failure to make fee payments promptly will result in the PSI certificate being cancelled; removal of the company’s name from the list of beneficiaries (posted on NIPC website); and notification to FIRS for collection of tax for the unexpired period as well as the period for which there was a default in payment of fees. NIPC reserves the right to proceed with the cancellation of a beneficiary’s PSI certificate following two reminders sent to the company’s registered address and/or correspondence email provided in its application form or most recent annual performance report.
Under impact Assessment, the Nigeria Investment Promotion Council, the NIPC will carry out periodic PSI impact assessment surveys. Beneficiary companies are required to furnish it with any relevant information requested for publishing on its website with data presented in an aggregated format.
Beneficiaries of PSI are also required to comply with the provisions of the IDA and conditions set out in these Guidelines
An industry or product is designated as pioneer if it is not being carried on in Nigeria on a scale suitable to the economic requirements of the country or not at all; or where there are favourable prospects for further development; or if it is expedient in the public interest to encourage the development and establishment of an industry in Nigeria.