Executive Chairman of the Federal Inland Revenue Service (FIRS), Zacch Adedeji, has said that tax incentives are difficult to track as they are not properly weighed against their real economic benefits, which makes it hard to know their true cost.
According to him, this creates room for unverified tax expenditure figures in different quarters.
Adedeji made this known 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, on Tuesday.
The event, with the theme: “Tax Expenditure and Its Effect on Government Revenue,” was aimed at examining whether tax incentives are genuinely driving economic growth or quietly draining the nation’s revenue base.
The FIRS chair, who was represented by the Coordinating Director, Corporate Services Group, Bolaji Akintola, revealed that revenue lost to tax expenditure remains difficult to quantify due to poor data availability across relevant government agencies.
He pointed out that the policy directive was designed to support critical sectors such as industrialisation, employment creation, innovation, infrastructure, and foreign exchange earnings.
However, the lack of proper data management and impact assessment has made it difficult to evaluate the true cost and benefit of these incentives.
“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,” Adedeji stated.
He said it had been argued that the government is losing revenue through tax incentives, which have been difficult to quantify due to limited data availability.
The FIRS boss pointed out that in granting tax incentives, there are expected benefits 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,” he added.
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 decried 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.
Adedeji further called for amendments to the various laws underpinning tax expenditures, saying this has become necessary to prevent abuse and ensure the system is flexible enough to keep pace with global reforms, such as the OECD’s Pillar II global minimum tax rule.
He also advocated for a centralised framework to regulate and monitor tax incentives, stressing the need for consistent cost-benefit analyses to determine which incentives should be sustained.
This, he said, would also help eliminate duplication and overlap among Ministries, Departments and Agencies.
