Following reports that FG wishes to grant investors in the power sector further tax holidays, the Chief Executive Officer, Financial Derivatives Company Limited, Mr. Bismarck Rewane, has stated that the sector needs a financial bailout, not a tax holiday.
FG intends to stimulate investment in the sector by granting tax holidays to current investors. Rewane doesn’t think this is the right decision.
“A tax holiday only incentivises those who are making profit. These are loss-making entities right now, because they borrowed monies and borrowed in dollars as well. What the government should be doing is to look for how to bail them out rather than give them further tax holidays,” he said according to Thisday.
“Tax holidays are good for people who initially were profitable and all of a sudden became unprofitable, that is like Google, Facebook or MTN. Tax holidays helped them in investing more. Tax holiday is useful after the fundamentals of that industry have shown that the companies are going to be profitable. Right now, that is not the case. What these companies need is a financial bailout and interest moratorium to enable them cover their cost and invest additional capital in transforming the industry,” Rewane explained.
Although CBN had created a special intervention fund for the power sector, Rewane said it is always “too little and it is never enough. So, they (government) need to do something really bold.”
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