The implementation of the Petroleum Industry Act 2021 (PIA) is going to significantly reduce the revenue accruable to the Federation Account, the Revenue Mobilisation Allocation and Fiscal Commission (RMFAC) declared on Wednesday.
It stated that while the PIA sought to provide legal, governance, regulatory and fiscal framework for the management of the petroleum industry and the development of host communities, its promoters might not have thought through the impact of the Act on revenues to the Federation Account.
The RMAFC disclosed this in a report it presented to oil and financial sector players as well as other stakeholders at a retreat with the theme, “Petroleum Industry Act 2021 and its Impact on Federation Revenue,” held in Uyo, Akwa Ibom State.
In the report, the commission said, “The Petroleum Industry Act 2021 is a bold attempt to address regulatory and governance issues that have impacted negatively on the growth of the Nigerian petroleum industry in the last three decades.
“It is also presumed that the PIA will promote efficiency and make the industry more competitive.
“Regrettably, the promoters of the PIA may not have thought through the immediate impact on revenue accruals to the Federation Account and as such, the PIA has effectively and substantially reduced revenue that ordinarily should have accrued into the Federation Account.”
It added:“The creation of multiple funds, funded directly or indirectly from the Federation Account is a major issue. The adoption of the dual tax regime in the Petroleum industry (Hydrocarbon Tax and Company Income Tax) as opposed to single tax regime (Petroleum Profit Tax) has its own advantages and disadvantage.”
“The effective tax rate in the PIA is significantly lower than pre-PIA. In conclusion it can be argued that the PIA has systematically and substantially reduced the revenue accruable to the Federation Account.”
The PIA 2021 was signed into law by the President Muhammadu Buhari in August last year after the bill had dragged at the National Assembly for more than two decades.