Tax break: Nigeria loses N650bn to NLNG, oil companies.

  
Various tax holidays and incentives granted by the Federal Government to multi-national oil and gas firms may have denied the country an estimated $3.3 billion in revenue.

Shell, Total and ENI, which form part of the Nigeria Liquefied Natural Gas (NLNG) consortium, benefited from the 10-year tax holiday.
Country Director, ActionAid Nigeria, Ojobo Atuluku, said at the launch of the global nongovernmental organisation’s report: “Leaking Revenue: How a big tax break to European gas companies has cost Nigeria billions,” in Abuja, yesterday, that the tax break dates back to 1999.
According to her, the NLNG Act grants a 10-year tax holiday that exempts them from all corporate tax payments for the first 10 years of operation.
She said that the NLNG Act made the consortium the only company in Nigeria with its own law defining its tax framework and also permanently exempts the consortium from a range of other taxes.
Atuluku described the lost revenue as the equivalent of twice the nation’s national education budget and thrice the healthcare budget for 2015.
“This calls for serious concern in a country where over 20 million children do not go to school and almost 15 out of 100 children die before their fifth birthday.
“ActionAid researches from 2013 show that the tax incentives cost developing countries at least $138 billion every year, part of which is an estimated amount of $2.9 billion or a whopping N577 billion Nigeria forfeits every year as a result of tax incentives.
“There are incontrovertible evidences from researches conducted in many developing nations that corporate profits are soaring and corporate investments in low income countries had tripled since the 1980s.
Yet the corporate tax revenues of the countries where these profits are generated have flat-lined as a percentage of their GDP,” she said. The development, she said, had resulted to women and children suffering as healthcare, schools and other key public services are starved of resources.
Towards this end, she said that ActionAid and partners on the Tax Justice platform would want Nigeria and other resource rich developing countries to begin a review of their tax incentive policies.
She tasked the National Assembly in particular that apart from reviewing the existing laws on tax incentives, it should also exercise caution in the proposed amendment to the Companies Income Tax Act 2004.
“The proposed amendment aims to provide additional tax incentives for gas utilisation, mining sectors and businesses located in areas with inadequate infrastructure.
It suggests increasing the length of specific sectors’ tax holidays and offering 10-year tax holidays to companies established where no infrastructure, that is electricity, water or tarred road, is provided by government. “As a consequence of this new bill, more foreign companies would be allowed to benefit from large breaks as the three oil companies in this case study did,” she said.
In another development, the Federal Government has lost about $1.1 billion between 2011 and 2012 in crude oil swap arrangement of the Nigeria National Petroleum Corporation (NNPC).
This disclosure was made in presentations by the Nigerian Extractive Industry Transparency Initiative (NEITI) and the Federal Inland Revenue Service (FIRS) at the opening of House of Representatives ad hoc committee investigating the NNPC/PPMC oil swap deals. NEITI’s acting Executive Secretary, Dr. Ogbonaya Orji, in his presentation, said the oil swap arrangement was flawed, stressing that between 2010 and 2012, NNPC exchanged a total of 539,029 barrels.
“For instance, in 2012, the cost of the crude oil that was swapped was $6.4 billion while the value of refined products returned to the country in exchange for the swapped crude was $6.3 billion. By this singular transaction, the nation lost about $100 million.
“These transactions are not an efficient use of Nigeria’s oil. When one compares the total costs of these arrangements (crude, processing fees, freight, demurrage, inspection and insurance) with reported prices for PMS, DPK and AGO, large losses result,” he said.
To mitigate price vulnerability, shortages in product availability and guarantee steady supply nationwide, in September 2010, the NNPC entered into crude-for-product exchange arrangement (swap) and crude oil Offshore Processing Arrangement (OPA) with Trafigura Nigeria Ltd, AITEO, Duke Oil and Ontario.
According to NEITI report, through the swap and offshore processing arrangements, Nigeria lost an estimated $1.109 billion between 2011 and 2012. In his presentation, Chairman, FIRS, Mr. Babatunde Fowler, disclosed that three companies involved in the arrangement owed the Federal Government N1.1 bilion in tax arrears.
He also revealed that Trafigura, a non-resident company, was not registered with the FIRS, adding that the company, since it has been operating in Nigeria, had never filed any returns with FIRS, which is in contravention of Nigeria’s tax laws.
Duke Oil Limited, another company owned by the NNPC, was also implicated in tax returns as it only paid N26.6 million since inception between August 2013 and August 2014.
The Comptroller General (CG) of Nigerian Customs Service (NCS), Col. Hammed Ali (rtd), represented by the ACG in Charge of Tariffs and Trade, Mr. Alu Roberts, said despite being involved in the oil swap deals, Trafigura had no record of bringing refined petroleum products back into the country. He said since 2004, the NCS ceased inspecting cargoes with petroleum products.