The burning desire to trigger the economic development of Nigeria in all its ramifications has informed the grant of tax holiday (i.e pioneer status) to companies who dare to venture into otherwise novel industries or uncharted areas of sufficiently groomed industrial sectors. As the inception of such novel business endeavours is usually plagued with high capital expenditure and little or no profitability. It is therefore pertinent and reasonable to avail these companies a sufficient period of zero tax liability to enable it become economically viable. Resultantly, Section 1 of the Industrial Development (Income Tax Relief) Act (hereinafter referred to as IDITRA) Provides that where the President is satisfied that –
(a)Any Industry is not being carried on in Nigeria on a scale suitable to the economic requirements of Nigeria or at all, or there are favourable prospects of further development in Nigeria of any industry; or
(b)It is expedient in the public interest to encourage the development or establishment of any industry to be a pioneer product.
Clearly from the above-mentioned unequivocal section, the President is empowered to grant a tax relief period to any deserving company upon an application in that regard to the Minister of Finance. Section 10 of IDTRA stipulates that the pioneer status shall not exceed a period of three years commencing on the production date of the company. Upon the expiration of the initial grant, a company may be availed a renewal for a total period not exceeding two years subject to the satisfaction of the President that the said company has fulfilled the requisite conditions spelt out in Section 10 (3) of IDITRA.
There has however been an erroneous belief held in some quarters for far too long that companies regulated by the Petroleum Profit Tax Act (i.e. PPTA) are not entitled to the grant of pioneer status. This is not unconnected with reference made to the Companies Income Tax Act (i.e CITA) in Sections 15 and 25 of the Industrial Development (Income Tax Relief) Act. According to Section 15 of IDITRA, the provisions of Part VIII of CITA shall apply in all respects to the profits of a pioneer company from its old trade or business as if those profits were chargeable to tax under the Act. This necessarily means that the pioneer company is liable to discharge all its statutory expectations contained in Part VIII of CITA during its pioneer period or tax holiday save the payment of tax. Some of these statutory expectations include the filing of returns with the Federal Board of Inland Revenue (i.e the board) upon a notice from it to file in the prescribed form. See – Section 52 of CITA. The qualifying capital expenditure of the companies applying for the pioneer status is also determinable under CITA by virtue of Section 25 of IDITRA which provides that – “Qualifying capital expenditure means capital expenditure of such a nature as qualifying expenditure for the purpose of the Second Schedule to the Principal Act.” The Qualifying Capital Expenditure of companies subject to PPTA is however determined by the provisions of the PPTA for such.
This cannot by any stretch of imagination be construed to restrict the grant of pioneer status to companies contemplated by CITA and thereby excluding companies subject to the Petroleum Profits Tax Act (i.e PPTA) from being entitled to such tax holiday. Section 1 of IDITRA which is the relevant provision empowers the president to grant pioneer status to any company which fulfils the stipulated conditions and neither makes any reference whatsoever to CITA no exclude companies regulated by PPTA (i.e petroleum companies) from enjoying a pioneer status. The wordings of Section 1 of IDITRA are very clear and unambiguous. It is a settled law that Tax Statutes are given literal interpretation and not to be construed liberally. This was the position in Cape Brandy Syndicate v IRC  12 Tax Cases 358 where the court per Rowlatt J. said that;
“In a taxing Act, one has to look merely at what is clearly said: there is room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing to be read in and nothing is to be implied. One can only look fairly at the language used.”
Similarly in the Nigerian Case of Aderawos Timber Trading Co. Ltd v. FBIR L.N.E.L.R – LR/1969/12 (SC), Ikpaezu J., stated the law in support of this approach as follows;
“It is the law that the language of a statute imposing a tax duty or charge must receive a strict construction in the sense that there is no room for any intendment and regard must be had to the clear meaning of the words.”
Consequently a reading of the provisions of Section 15 & 25 of IDITRA into Section I of IDITRA so as to exclude Companies regulated by the PPTA from enjoying pioneer status is a liberal interpretation. This in effect is tantamount to a presumption as to a tax which violates the fundamental canon of Tax Statute interpretation. Conclusively, to the extent that there is no express provision in IDITRA excluding companies subject to PPTA from enjoying a pioneer status if qualified, it is asserted on good authority that petroleum companies just like other companies are entitled to the grant of pioneer status upon the fulfilment of the requisite criteria.
Olutayo A. Awoyele
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