The revelation that International Oil Companies (IOCs) operating in Nigeria are owing the Federal Government a total of $7.8 billion (about N1.3 trillion) in unpaid taxes is yet another evidence of the penchant of some of the oil majors for playing hanky-panky with Nigeria’s tax laws. Even more worrisome, though, is the apparent dereliction of duty, or the possible connivance of relevant government tax agencies with the IOCs on their staggering tax defaults.
The huge amount of tax that is yet to be remitted by these IOCs is an indication that some public officials have been negligent in the performance of their statutory responsibility of ensuring that multinational oil companies comply strictly with the laws guiding the remittance of their taxes to government coffers. It shows that our tax laws were not properly enforced in this instance, leading to this huge default that is nothing but a sabotage of the Nigerian economy that requires appropriate sanctions.
Nevertheless, we welcome the order from the presidency to the Federal Inland Revenue Service (FIRS) and other relevant government agencies to recover the unpaid taxes forthwith. The amount said to be due from the Joint Ventures (JVs) of the Nigerian National Petroleum Company (NNPC) and IOCs operating in the country, is about 30 percent of the Federal Government budget for the current fiscal year.
The presidential order is the outcome of a recent audit of the oil companies’ tax estimates by the Nigerian Extractive Industries Transparency Initiative (NEITI). The companies reported to be involved in this under-remittance of taxes are the Royal Dutch Shell Plc, Exxon Mobil Corporation, Chevron Corporation and the French and Italian-owned Total SA and Eni, respectively. Part of the audit report threw up a potential revenue loss of $9.8 billion resulting from under-assessments and under-payments of taxes and rents, process manipulation and poor interpretation of agreements between the Federal Government and the oil firms indicted in the audit report. Of the $9.8 billion, government says only $2 billion has been recovered, while $7.8 billion is yet to be paid.
This is a very serious offence, which cannot be tolerated by any responsible government. It is the kind of offence for which heads of corporations are prosecuted and jailed in the more developed countries. In that regard, FIRS needs to explain what happened and move fast to recover the sum.
While we acknowledge the efforts of FIRS to boost the government’s revenue profile through corporate tax remittances in recent years, it is rather strange and implausible that such huge amounts of tax could be evaded without the involvement of pubic officials. Therefore, the circumstances that made these tax assessment and remittance shortfalls possible should be thoroughly investigated and those found culpable adequately punished.
For the oil majors indicted, they have rubbished their own corporate image and made nonsense of their much flaunted good governance and social responsibility credo. They need to reassess themselves and sit up.
Over the years, the oil sector in Nigeria has become a filthy arena for different forms of corrupt practices. Many multi-national oil companies take advantage of the corruption in the sector to fleece the country of revenue. According to the Chairman of NEITI, Mr. Ledum Mitee, this is largely done through underpayment, and sometimes, outright non-payment of taxes and royalties, as well as other statutory infractions.
We welcome government’s plan for an Inter-Ministerial Task Team to implement the findings and recommendations of NEITI. This is long overdue. It is a right step towards sanitizing the oil sector. It has become necessary to compel all oil companies operating in the country to comply with the laws of the land and instill transparency in their operations. If we do this, oil majors in the country will be conscious of the consequences of their action, and will no longer act with impunity on tax remission.
Before now, government has not been taking NEITI’s audit reports seriously. For instance, three years ago, NEITI’s audit report revealed that between 1999 and 2008, oil majors in Nigeria underpaid government a total sum of N38 trillion. Such sharp practice hampers economic development of the country. It also gives a poor image of Nigeria.
If this presidential directive is faithfully carried out, it will demonstrate the government’s unalloyed commitment to checking all sources of revenue leakage and ensure that accurate payments are made by oil companies operating in the country. The amount involved will be enough to balance the deficit in the 2013 Federal budget or offset part of the current domestic debt put at over N6 trillion.
Altogether, we commend NEITI for its diligence in discharging its statutory responsibilities, in particular, the checking of corrupt practices such as evasion or underpayment of taxes, dividends, bonuses and levies.
With NEITI having done its own part of the job, we urge all the government agencies mentioned in the audit reports to follow through and recover the outstanding amounts as directed by the President. It will also not be enough to just recover the unpaid taxes. Appropriate sanctions should be imposed on all those that are found to be involved in this obnoxious practice to deter future infractions.
