Finance Minister, Kemi Adeosun, railed recently against the negative practices of multinational corporations in developing countries as she canvassed international cooperation in tackling Nigeria’s tax evasion crisis. She cited corruption, tax evasion and the resultant illicit financial outflows that impoverish millions of people and hobble the economy. By failing, however, to build strong governance institutions and an efficient regulatory framework, and to tame corruption, the Nigerian government bears the greater blame for the misbehaviour of MNCs operating in its territory.
Seeking and securing the cooperation of foreign governments, especially those of the home countries of the major global companies, is crucial. This, however, should be accompanied by a vigorous house cleaning: charity is still better begun from the home front.
In her address at the Platform on Tax Collaboration Conference, jointly organised by the Organisation for Economic Cooperation and Development, World Bank Group and the United Nations, in New York, the United States, Adeosun sought the designation of malpractices by MNCs in developing countries as “foreign corrupt practices.” Such designation has been codified into laws in the US and several European countries and criminalises acts of corruption indulged in abroad by their companies and nationals. Nigeria accounts for over 65 per cent of the $50 billion estimated by Global Financial Integrity in 2015 as the volume of annual illicit outflows from sub-Saharan Africa. With the help of multilateral agencies, Adeosun wants tax evasion, as well as other malfeasance by MNCs in Nigeria treated as corrupt practices and dealt with accordingly. As she rightly observed, “many operate a completely different standard in Africa to what obtains globally.”
It is so different that whereas gas flaring during crude oil extraction, for instance, has been virtually eliminated in its twin headquarters in Holland and the United Kingdom and its wells in advanced economies, Royal Dutch Shell’s Nigerian subsidiary, once dismissed the government’s deadline to finally end flaring as unfeasible before a National Assembly committee a few years ago. Among other serial misdeeds, the Nigerian Extractive Industries Transparency Initiative reported that oil and gas firms withheld statutory payments of $4.4 billion and N358.3 billion to the Federation Account in 2013. Some Asian companies operating in Nigeria have had numerous run-ins with the authorities over tax evasion and other sharp practices here, including violation of labour and immigration laws.
Securing global cooperation to tighten the noose on tax dodgers and other felons is sound and in line with pursuing the ongoing war against corruption in all its ramifications. Impunity by multinationals is an apt reflection of how Nigeria is badly run. Some MNCs evade taxes, degrade our environment, maltreat their Nigerian employees and transfer billions of dollars illicitly precisely because the country provides a fertile ground for such activities.
Officials collude with MNCs to break the law and this underscores what a former British Prime Minister, David Cameron, described as our “fantastically corrupt” system. Latest rankings on the Corruption Perceptions Index released by Transparency International where Nigeria was 148th out of 180 countries, confirm this. The federal and state governments pay lip service to reversing our tax-to-Gross Domestic Product ratio of 6.1 per cent, one of the lowest in the world, because they have easy access to crude oil revenues, whereas modern, successful economies rely on taxes.
To correct this and knock MNCs and local firms into line, government should turn the anti-corruption heat on revenue collection and regulatory agencies. Reforms are sorely needed at the compromised Department of Petroleum Resources, the Federal Inland Revenue Service, Nigeria Customs Service and other regulators.
There should be policy consistency and, above all, strong political will to enforce the rules. A former president, Olusegun Obasanjo, recalled how his administration deported some Indian businessmen who allegedly cheated Nigeria of N3 billion in unpaid duties only to be pardoned and brought back by a later government. While the US, Germany, France and Italy variously imposed hefty fines on MNCs involved in the Halliburton, Siemens and Malabu Oil block scandals, their local subsidiaries and Nigerian officials who perpetrated the scams, escaped with a slap on the wrist or no censure. Another former president, the late Umaru Yar’Adua, whimsically “pardoned” Siemens despite the German firm having been fined $248 million by a Munich court in 2007 for a bribery scandal in Nigeria.
Government should fast-forward action on the new National Tax Policy it approved in February and clamp down on corporate crimes. New legislation and rules to cope with current realities should be enacted along with cutting edge technology. The UK introduced new rules to punish “enablers” of tax evasion such as lawyers, accountants and bankers, who face fines of up to 100 per cent of tax evaded: about £50 million is expected by the treasury from this ordinance. The US Inland Revenue Service also has a multiplicity of penalties for tax dodgers that it strongly enforces.
Strong institutions free of political interference are essential. Reforms saw Brazil’s federal tax revenues rise to $48.11 billion in January 2017, 10.12 per cent higher than that the corresponding period of 2016.
Nigeria should be focused: every sovereign territory should make its own rules and impose its writ within its own jurisdiction. MNCs have a murky record in pre-revolutionary Cuba, Iran and Chile. It is strong action by nationalistic governments that keep them in check. Perpetual vigilance matters too as evident in the US clampdown on Volkswagen over emission levels violation; the Irish and French authorities’ sanctions against Google, while Germany is known for very tough laws against tax evasion.
International cooperation will become more effective and forthcoming when we clean up the domestic front.
