It is called Conglomerate Tax. It is a game played in all parts of the world. Conglomerates use their powers and scales to bully governments to do things the very way they want things. If governments refuse, they do not invest and nothing changes. Because they know the governments are financially incapable or strategically deficient, they hit them at the pain points: I cannot solve this problem if you do not accept my terms.
You may not like it, but there is nothing you can do about it. It is legal. From GE to Carlos Slim Grupo Carso, citizens subsidize most things conglomerates do as most times they do not have to pay tax. They get great deals you wish you can. And you can if you follow the game plan (I will explain later).
The news is that the Dangote Group will not pay tax in the next ten years for it to help Nigerian government fix roads.
The Nigerian government has granted a 10-year tax incentive to Dangote group for the construction and rehabilitation of roads, Minister of Power, Works and Housing, Babatunde Fashola, has said.
Mr. Fashola made this known while speaking at the Businessday Road Construction Summit, held in Victoria Island, Lagos, on Friday.
Mr. Fashola, who disclosed that construction of the Apapa to Oworonshoki end of the Lagos-Ibadan expressway has been handed over to the company, said the government had approved a review of the five-year limit on tax order enjoyed by the company to 10 years.
“We inherited a tax incentive policy for individuals to benefit from tax remission, to recover investment made in public infrastructure like roads, which other members of the public can utilise,” Mr. Fashola said.
He noted that pending applications from Dangote Group were not approved by the previous administration, which the present administration has now approved and work has commenced on the 42.9 km Obajana – Kabba road in Kogi State
Dangote Group deserves its deals. I congratulate the firm. I just hope government will extend same to other businesses who may like such deals. If they refuse to extend such deals to other companies with capabilities, it becomes corruption from government against the Nigerian people
But as it stands, there is no issue, in my opinion, if anyone can get that same deal for other roads. Dangote Group needs those roads to do business and government cannot keep them in good conditions. Dangote Group has been paying taxes and yet nothing has been done on the roads. So, Dangote Group wants to keep the taxes and fix the roads. Magical. But what happens if Dangote Group tax burden is 4x the cost of the roads? Government will not go there.
I do think if they extend the deals to the banks, telecoms and oil companies, Nigeria will collapse. Sure, most of the roads will be built, but Federal Inland Revenue Service may just close as there will not be a need to be collecting taxes. Just pick a road and fix it and taxes will be forgone for ten years.
But yet, besides the above points, this is the heart of what even made it possible for Dangote Group to begin that conversation. It is called the accumulation of capability. Once you have it and attain that position, governments will do senseless deals with you. They know you have the power and can help them, and without you, there is nothing else they can do.
After the publication of this piece where I noted how entrepreneurs can use the accumulation of capability to improve their abilities to create wealth, as Dangote Group does, most people noted that Dangote Group has been receiving government support. The assertion is that Dangote Group gets perks from Nigerian government and that has driven its success. In this piece, I explain how you can also get the same level of government support that Dangote gets. It is called Conglomerate Tax and it is done all over the world. The more a firm operates at the upstream, asset heavy, high risk, and long-term view level, the more it needs goodies from governments.
And for governments that want help to put infrastructure at high pain levels, they always listen. U.S government could give Carnegie free land for rail-roads but may not give any to a man that wants to build a toothpick factory. Similarly, Nigerian government can give goodies to Dangote Refinery and may struggle to offer same to a businessman that wants to import toothbrush
You may feel bad, but there is a clear path to enjoying conglomerate tax: just accumulate capability and you can control governments. It is a universal syndrome, unfortunately.