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Tax Incentives Catalyst For Industrial Development And Economic Growth
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HYPOTHESIS THREE
Ho: Tax incentives cannot be used to off-set other disadvantage that investors may face.
Hi: Tax incentives may be used to off-set other disadvantage that investors may face.
1.8 DEFINITION OF TERMS
1.
INCENTIVE- An incentive is a form of tax relief, inform of a reduction
in or an exemption from the tax which someone, a firm, or an industry
would normally be liable.
2. TAX INCENTIVES-These are reliefs granted
to tax payers or industries in form of an off-set from the total profit
before tax liability is determined. In case of industries and firms,
tax incentives are given inform of tax holidays which is established by
the legislative authorities on such payment of taxes.
3. DISPOSABLE
INCOME- This is the personal income available for consumer spending,
savings, and investment consisting of all incomes less taxes and other
payments to the government.
4. INITIAL ALLOWNACE- Initial allowance
is defined as an allowance granted to companies who have incurred a
qualifying capital expenditure during the basis period for a year of
assessment in which the asset was first put into use for the purpose of
the companies trade or business.
5. ANNUAL ALLOWANCE- This is
provided/ granted to companies who have incurred a qualifying capital
expenditure during every year of assessment in which the asset is in use
at the end of the basis period whether or not the initial
allowance has been granted. It is granted each year of assessment in
respect of any asset used wholly, exclusively, necessarily and
reasonably till the end of the accounting year for the purpose of the
trade.
6. CAPITAL ALLOWANCE- This is granted by the act on a
qualifying capital expenditure incurred wholly, exclusively, for the
purpose of trade or business.
7. INVESTMENT ALLOWANCE- Investment
allowance is given as a tax incentive to a certain category of companies
for incurring some qualifying capital expenditure on plant and
equipment used for the business at the rate of 10% on cost.
8. EXPORT
PROCESSING ZONE ALLOWNACE- This is granted to a company that has
incurred expenditure on a qualified building, plant and equipment in an
approved manufacturing activity in an export processing zone to a tone
of 10% of it’s capital allowance in any year of assessment.
9. RURAL
INVESTMENT ALLOWANCE- This is granted to all capital expenditures
incurred by companies established in rural areas in respect of providing
a lacking infrastructural facility.
10. TAX OFF-SET- Section
(17) of the act provides that custom duties on essential plants,
royalties on domestic sale of crude oil and investment tax credit should
be deducted in full before arriving at the chargeable tax to be paid by
such company.
11. ROLL-OVER RELIEF- According to section (31) (CGT
Cap C1, LFN, 2008, a roll-over relief arises where the proceeds from the
disposal of an asset is re-invested into the acquisition of a new asset
which is of the same class with the old asset disposed. It is also
granted to the owner or disposer of an asset which is destroyed or lost.
12. LOSS RELIEF- A company under this Act may be elected to defer the set-off or loss incurred to another period.
13.
EXPLORATION INCENTIVE- These are incentives granted to all expenditures
which are wholly exclusively, necessarily and reasonably incurred for
the purpose of petroleum operations.
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