...the tax codes allow tax payers to claim certain benefits in relation to their business investments in the country as well as reduce the certain tax burdens which they would have borne, were such provisions not available. One of such provisions is the right of the taxpayer to claim capital allowance on qualifying capital expenditures as provided in the Companies Income Tax Act (CITA), Personal Income Tax Act (PITA) and Petroleum Profits Tax Act.
Paragraph 24 (7) of the Second schedule to CITA provides that: “the amount of capital allowance to be deducted from assessable profits in any year of assessment shall not exceed 66-2/3 per cent of such assessable profits of a company, but any company in agro-allied industry or which is engaged in trade or business of manufacturing shall not be affected by the restriction under this sub-paragraph”.
The import of the above Paragraph is that every company other than those in the agro-allied and manufacturing industries is required to restrict claim of capital allowance to ensure that they pay tax of certain amount to the government in every tax year, provided they have assessable profits.
The agro allied and manufacturing industries are two economic sectors that have been adjudged critical to Nigeria's rapid industrialization but whose potentials have become sabotaged due to the propensity for rent seeking from the resource sector resulting in non-implementation or ineffective implementation of defined policies for agro-allied and manufacturing industries. A non-performing or below average performing power sector has also triggered the closure and relocation of many operations of companies in the manufacturing sector completely out of Nigeria to neighbouring West African countries with secured and stable supply of power and from those countries, these companies export their products to the Nigerian market. With the shutdown of such operations in Nigeria, a natural opportunity cost are jobs previously held by Nigerians, which may no longer be required or probably available much cheaper in the new location.
The point must nevertheless be stressed that the capacity of the agro-allied industry to provide, for instance, remunerative employment to the teeming unemployed Nigerians is 4 times the capacity of the manufacturing sector to provide same in the same period. Thus, for every one job created by the manufacturing sector, the nation can expect 4 at least from the agro-allied industry.