Taxation Battle Over Multinational Companies Non-compliance

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“Sadly, the compliance level of the oil and gas exploration and production companies in payment of levies and taxes is very low and in fact, pitiable,” contained in a letter Governor Henry Seriake Dickson of Bayelsa State personally wrote to President Muhammadu Buhari and Vice President Yemi Osinbajo (SAN), dated April 18, 2016.

There are indications that multinational companies in the country involve in illicit financial movements in corporate tax evasion and avoidance, with links to one heinous activity, especially, bribery.

They also milk their operating stations without contributing to the economies of the country by means of tax payment. They use trade or transfer mispricing, manipulation of tax treaties to defraud the country.

They rely on global network of dual taxation treaties or agreements. They believe that with the treaties, they can earn their income in the country other than their home country and shy away from or reduce the tax they ought to pay to their home countries’ governments.

Worried that many multinational companies do not have regard to the laws of the country and laws regulating tax in the 36 states of the country, Dickson therefore sought after the help of the Federal Government (FG) to persuade multinational oil companies to stop evading tax.

He added, “Our further position is that the Federal Government and its agencies should not condone or support irresponsible behaviour by these companies whose conduct subvert and undermine the authority of the State and our economy especially in the areas we have legislative authority such as Development Control, taxes permitted by Federal Laws and other legislations within the residual powers of the State.”

Trillions Of Naira Lost
Since August 2016, the FG has been inundated with a call that multinational companies must pay their tax. Checks revealed that Nigeria has lost money amounting to trillions of naira as a result of tax evasion by the multinational companies in the country.

Just in January 2016, Nigeria lost a monstrous US$3.3 billion to a strange tax holiday approved by the FG to three of the world’s principal multinational oil and gas companies operating in the country.

Findings by this writer showed that at the popular official rate authorised by the Central Bank of Nigeria (CBN), that amount was the equal of N650.1 billion; while it was N957 billion at the corresponding market, with dollar exchanged for N290.00 or thereabout.

It was observable that this tax freedom was three times the bulk of Nigeria’s healthcare account (US$1.4 billion) for 2015; it was again above US$2.4 billion that was meant for education sector same year.

Double Taxation
The ActionAid, an international development agency analyzed the double taxation treaty like it’s in Nigeria-Mauritius, saying that companies doing business in Nigeria have the loophole to avoid tax by steering their investments through Mauritius as contrasting to investing unswervingly in Nigeria.

Pundits expressed dissatisfaction, saying that these were not good for Nigeria with a population of over 170 million. They added that by 2013, Nigeria was Africa’s largest economy, with a GDP of 521 billion USD and an annual growth rate of 5.4%, with debt in that year, amounting to 19% of the GDP.

But in all that, there were indices that poverty was at 33.1% with the tax-to-GDP ratio at 14% in the same year. There were also fingers pointing at oil companies that include Shell Petroleum Development Company of Nigeria Limited (SPDC); Nigerian Agip Oil Company Limited (NAOC); Chevron Nigeria Limited (CNL); Consolidated Oil (CL); Conoil Producing; Brass LNG and Aiteo Energy, as major culprits in tax evasion.

According to a reliable source, “Just like the oil companies, in a rare disclosure in 2013, MTN Nigeria, a telecom company, admitted it made unauthorised payments of N37.6 Billion to MTN Dubai between 2010 and 2013.

“The transfers were then “on-paid” to Mauritius, a shell company with zero number of staff and which physical presence in the capital Port Louis is nothing more than a post office letter box.

“The disclosure amounted to a confession given that MTN made the dodgy transfers without seeking approval from the National Office for Technology Acquisition and Promotion (NOTAP), the body mandated to oversee such transfers.”

Corporate Tax Evasion
There have been policies by the Federal Inland Revenue Service (FIRS) and the Joint Tax Board (JTB) in making sure that taxes are collected, but these policies died as soon as they were implemented.

Some reports have shown that Organised Private Sector (OPS) and the oil and gas industry have robbed Nigeria enough by evading tax. The source revealed that in 2006, it was a tug of war when the House of Representatives Committee on Petroleum Resources had to look into Chevron Group of Companies for tax evasion.

There was tax blunder allegedly committed by the company which was to the tune of $10.8 billion (an equivalent of N140 billion), after an audit report had indicted it.

“Chevron over-bloated its cost of operation and evaded tax by $1.394 billion; claimed unmerited cash call of $2.112 billion," said the committee.

Many Nigerians and groups condemned the act by the company and tagged it as national embarrassment but blamed the country for being irresponsible with its tax system that these companies could maneuver.

Viewpoints By African Union
From Nigeria to Niger, from Somalia to Soweto, indications have emerged that oil multinationals and multinational companies swindle Africa’s tax billions yearly, said African Union (AU)

Against this backdrop, the Federal Ministry of Finance had to inaugurate a participatory method of instituting a Presumptive Tax Regime to successfully tax the casual sector, while Nigeria’s Joint Tax Board (JTB) had initiated the practice of balancing the assorted ( given at about 85) diverse taxes charged diagonally in the country to stay-away-from numerous taxation but criminalise the practice.

There was the introduction of a Tax Identification Number (TIN), which was meant to distribute a digit to a person as a requirement for involvement in some economic activities. There had been platform established for fair taxation: The Tax Justice & Governance (TJ&GP), which aligned with Oxfam, Actionaid, Christian Aid and others. This platform made appearances in May 2014, as a host of Pan African civil society when the African Union Finance Ministers meeting held in Abuja, likewise in the World Economic Forum on Africa held in Abuja .

In March, the same year, a sophisticated panel by AU (chaired by former South African President, Thabo Mbeki) on illicit financial flows, had found out that the money Africa had lost in tax was more than what it received in improvement aids from abroad or foreign direct investment joined together.

“They (multinationals) are depriving some of the world’s poorest countries of money vitally needed to pay for schools, hospitals and other essential services,” said the report.

ActionAid, conversely, noted that what the multinationals have been doing on the country, Africa should be renegotiating on tax, among the African governments, if necessary. The organisation advised that Africa might cancel some of her tax treaties in making sure that more money was accessible to help better the lives of the majority of her citizens.

“About $138 billion is given away by governments in developing countries annually in corporate income tax exemptions. The amount could have been enough to put every primary school aged child in school, meet all the health-related Millennium Development Goals and leave enough money for the agriculture investment needed to end hunger. African governments should also review their tax incentives and cooperate at a regional level to develop a coordinated approach to tax competition,” ActionAid said.

Government’s Voice
The Minister of Finance, Mrs. Kemi Adeosun on October 7, 2016, while briefing journalists in Washington D.C concerning the aftermath of a closed-door meeting of G-24 of an IMF/World Bank meeting, screamed that all multinational companies doing business in the country rarely paid tax and must pay their taxes.

“We were able to make two contributions; one of it was the need for accelerated investment in infrastructure as the way out of our current situation. This is what we believe will create jobs and reduce poverty.

“Another issue that we raised was tax evasion and the fact that we need the multilateral agencies to support us. Yes, trade is very important, but we need the multilaterals to ensure that all multinational companies that trade in Nigeria pay their fair share of taxes and that point was well taken,” Adeosun said.

Senate President Bukola Saraki related on October 12 2016, at the 22nd version of the Nigerian Economic Summit in Abuja that Nigeria’s corporate taxation scheme should be improved on to get the country out of the economic downturn.

“With 37 million small and medium scale enterprises providing about 95 per cent of our jobs, as we promote ‘made-in-Nigeria’, we must also use our legislative powers to amend the taxation laws. To get out of this recession, we must provide a business-friendly environment,” he said.

On August 3 2016, the Federal Executive Council (FEC) in a meeting presided over by Major General Muhammadu Buhari had approved a Multi-lateral Competent Authority Agreement on Exchange of Country by Country Report.

What this meant was that the accomplishment of the report would help the government to fast track tax laws. This was made known by the Minister of Information and Culture, Lai Mohammed, in Abuja. Mohammed also informed that revenue companies have lost a lot of money.

“Where multinational companies operate, it’s quite easy for them to move profit from one territory to another territory where the tax law is very favourable to them. And what has happened over the years is that the revenue companies have lost a lot of money.

“As at the last count, over $1 trillion has been lost over a period of time. And the revenue companies have found that they were losing more money in terms of tax evasion and avoidance than what they were even receiving as grants from multinational agencies,” Mohammed said.

Importance Of Tax
An analyst who would not want the name in print told this writer that the importance of tax was immeasurable. He lamented that he wouldn’t know why multinational companies evade tax.

He added that apart from resources from agriculture before oil was found in 1956, Nigeria was thumping the ground with revenues from tax. He believed that Nigeria has lost a lot in the absence of tax since crude oil was discovered.

Apart from the money made from agriculture before the discovery of oil, this writer gathered that a personality like Chief Obafemi Awolowo (now late), as the first premier of the Western Region, built a lot of people-oriented infrastructures from money, also, gotten from tax.

According to the source, Awolowo built such structures that included the University of Ife (now Obafemi Awolowo University); Airport Hotel, Ikeja, Lagos; Oodua Textile Mill, Ado Ekiti; Ifon Ceramics Industry, Okitipupa Oil Palm Plc, Oluwa Glass Company Plc, Ondo state, Cocoa House and the Western Nigeria Television Authority (Now NTA), Ibadan, and so many others.

This writer’s source said that no country survives when its citizens, but especially, mutlinational companies doing business in that country are evading tax. He, therefore, suggested that all companies have to pay tax according to their resources.

Odimegwu Onwumere is a Poet, Writer and Consultant based in Rivers State. Tel: +2348057778358. Email: [email protected]

Disclaimer: "The views/contents expressed in this article are the sole responsibility of Odimegwu Onwumere and do not necessarily reflect those of The Nigerian Voice. The Nigerian Voice will not be responsible or liable for any inaccurate or incorrect statements contained in this article."

Articles by Odimegwu Onwumere