It is what America does best: use tax incentives to seed innovation and create new industries. As a student member of the United States National Science Foundation CISST committee, I saw first hand how a great nation predicts its future by creating it. America ushered the ecommerce sector through a single line in a legislation in Congress: thou shall not be required to collect sales tax when selling things online!

Magically, that line pushed many people to begin to buy things online because buying online saves you 8-12% of sales tax. Why go to a physical store to pay tax when buying the same thing online will save you that money? Of course, you are expected to self-report that sales tax when filing your tax, but no one does and America was fine with it. So, a new sector emerged because America intentionally created it. Of course, Amazon is now collecting taxes for states: “If you’ve been enjoying sales tax-free purchases online, get ready for a major change. Amazon will begin collecting sales taxes from all states with a sales tax as of April 1, 2017. “

They did the same with electric vehicles when they pumped credits upon credits making it possible for companies like Tesla to rise. Today, they see friction to fix as they combat  the paralysis in the semiconductor  industry by providing a 25% tax credit for semiconductor manufacturing. Just watch how companies will respond in coming months.

Global chip shortage has added to the existing need for the United States to up its semiconductor production. China has become a chipmaking rivalry in recent years, which the US has tried to contain through trade agreements with China, designed among other things, to protect its intellectual properties.

COVID-19 outbreak ushered in a new normal that revved up chip demand, as the whole world relied more on technology and artificial intelligence to carry out tasks. Against this backdrop, from smartphone to auto production has been seriously impacted, and the US government knows it needs to do more to ameliorate the growing chip scarcity.

Thus, a bipartisan group of U.S. senators on Thursday proposed a 25% tax credit for investments in semiconductor manufacturing as Congress works to increase U.S. chip production. Reuters has the report.

Smart policies continue to shape industries in America. And I am hoping that Nigeria will begin to pioneer the use of its tax policies to improve the allocation of factors or production. The challenge in the power sector is something a brilliant policy would have stimulated resources to fix at scale. Indeed, our tax policies are largely for revenue collection. We need to get them to be used as growth drivers for industries of the future. Tax Policy for Industrial Growth is a line I approve.

US Senate Proposes 25% Tax Credit for Semiconductor Manufacturing

A microchip is a composite of transistors which are biased at different regions using current. In analog circuits, you need to calculate the amount of current to pass through the transistors so that they will run within the operating regions of interest. To determine that current, you solve some calculus which provides you the length, width, etc of the transistors. But no matter what you have done, you will always optimize things when simulations show variations from design and operations. Those variations come from many factors, including the process you have designed for. This is what I do for a living!

Interestingly, the processes involved in many circuits are also what great nations use to run policies. You commit to a policy, you try things and over time, you look at data. Depending on what you have seen, you recalibrate. For example, President Biden is learning many things on the correlation between social support and looking for jobs.

That brings me to a new IMF call on Nigeria: the resurgence of fuel subsidies: “The mission expressed its concern with the resurgence of fuel subsidies. It reiterated the importance of introducing market-based fuel pricing mechanism and the need to deploy well-targeted social support to cushion any impact on the poor.” 

“The mission expressed its concern with the resurgence of fuel subsidies. It reiterated the importance of introducing market-based fuel pricing mechanism and the need to deploy well-targeted social support to cushion any impact on the poor. The mission recommended stepping up efforts to strengthen tax administration to mobilize additional revenues and help address priority spending pressures.

“The Nigerian economy has started to gradually recover from the negative effects of the COVID-19 global pandemic. Following sharp output contractions in the second and third quarters, GDP growth turned positive in Q4 2020 and growth reached 0.5 percent (y/y) in Q1 2021, supported by agriculture and services sectors.

“Nevertheless, the employment level continues to fall dramatically and, together with other socio-economic indicators, is far below pre-pandemic levels. Inflation slightly decelerated in May but remained elevated at 17.9 percent, owing to high food price inflation.

“With the recovery in oil prices and remittance flows, the strong pressures on the balance of payments have somewhat abated, although imports are rebounding faster than exports and foreign investor appetite remains subdued resulting in continued FX shortage.”

It added that the IMF mission appreciated the authorities and other counterparts for the open and thoughtful discussions and excellent cooperation.

My question is this: Why are we going back to this? What is the justification after we swore that it was all over?

My understanding was that Nigeria was phasing this out. Now that it is coming back – why, and what have we learnt for it to be back. I understand that the government does not want the burden of fuel cost on the poor. But that is why we need to get the National Identity Management Commission working so that we can deliver support to the needy in a more targeted ways via the National Identity Numbers.

At Tekedia Live, the live session of Tekedia Mini-MBA, I will discuss “Building Great Companies and Brands”. My cases will be Indomie Noodles and Apple corporation.  I will explain four characteristics I have seen in great brands and companies, connecting them to the Grand Playbook of Business lecture. 

To become an enduring category-king in your business sector, you must possess these characteristics. With them, the firms build moats to protect their castles.

• Perceptively innovative: you are always innovating. You never rest, always pushing for better products, services and experiences. You outperform competitors with new solutions for unmet needs.
• Evidently inspired: you inspire your users. You are modern, trustworthy and inspirational, you have a larger purpose, helping people live out their own values and beliefs.
• Ruthlessly pragmatic: your customers depend on you and you have their backs, making life easier by delivering consistent experiences. You make good on your promises.
• Customer obsessed: customers cannot imagine living without you. You know what matters to customers, finding new ways to meet their most important. needs.

Time is 7pm WAT; Zoom link in the Board.