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Stakeholders decry fiscal malpractices in oil sector



Stakeholders in the country’s oil and gas sector have accused oil companies of deliberately hiding information about the various deals they undertake, with the intention to dodge relevant tax payments.

They alleged that some oil firms go abroad to sign deals on oil assets domiciled in Nigeria, and thus deny Nigeria the full details of the deals, which in turn limits the country’s ability to comprehensively probe when the need arises.

Such deals running into billions of naira, the stakeholders noted, were capable of lifting the country’s tax revenue base, and boosting the overall performance of the economy.

This worry was expressed by some advocacy groups, the Nigeria Extractive Industries Transparency Initiative (NEITI), the academia, media practitioners, the Revenue Mobilisation Allocation and Fiscal Commission (RMAFC), among others.

Some of the stakeholders also alleged that Nigeria remained the only oil-producing country that does not know how much oil it produces in a day.

Commenting on the development, human rights lawyer, Femi Falana, described the situation as pathetic, saying: “There is the need for us as a nation to go after these ‘big thieves’ that have put us where we are right now.

“The international oil companies (IOCs), and other oil companies that have defrauded the government in the area of taxes and non-disclosure of production figure should be investigated and brought to book.”

Falana had recently urged the Socio-Economic Rights and Accountability Project (SERAP), to collaborate with NEITI to help the Federal Government recover unremitted funds from the Nigerian National Petroleum Corporation (NNPC).

SERAP had decried the failure of the Federal Government to charge Capital Gains Tax (CGT) on $8 billion worth oil and gas assets sold between 2005 and 2015, which it said fuelled poverty and underdevelopment in the country.

It, therefore, called on the Nigerian authorities to urgently recover any possible past unpaid dues, and to enhance in the collection and estimation of Capital Gains Tax in the Nigerian oil sector.”

Recently, NEITI alleged that the NNPC failed to remit the funds into the Federation Account.

The stakeholders urged SERAP and other civil society organisations to take an interest in a judgment of the Supreme Court, which ordered the Federal Government to recover revenues lost to oil firms under the Deepshore Offshore Inland Production Contract Act over 18 years.

Meanwhile, the Department of Petroleum Resources (DPR), in a recent report, said the Federal Government earned N748 billion from taxes and royalties paid by oil and gas companies operating in Nigeria in 2017.

The report revealed that the revenue represented about 83 per cent of the agency’s target. The DPR had renewed close to 25 oil blocks, which had combined revenue of about $1billion.

According to the report, the agency granted approval for 16 new field development plans in 2017, which would significantly increase the nation’s oil and gas production when completed.

The DPR said: “We renewed 19 expired leases in 2017 to enhance upstream investment influx and accelerate oil and gas reserves and production growth.
“We actively supported the implementation of a major gas commercialisation programme, which seeks to create a regulatory framework to facilitate gas flare monetisation to end gas flaring by 2020.”

For the period under review, the DPR also issued 10 licences and approval for development of gas production and processing facilities that culminated in the commencement of the operation of the plant.

The stakeholders argued that rather than going to China to beg for a loan to build infrastructure, the Federal Government should concentrate on driving accountability in the hydrocarbon sector with serious attention on the recovery of unpaid taxes and full production disclosure.

SERAP, in its latest report titled, “Impact of Non-payment of Capital Gains Tax and Other Levies in the Oil and Gas Sector on the Socio-Economic Development of the Country,” said according to information obtained from the Federal Inland Revenue Service (FIRS) for the report, the governments of Umaru Musa Yar’Adua, and Goodluck Jonathan, failed to collect CGT on the sale of Addax Petroleum to Sinopec in 2009 from divestment of assets worth $2.5 billion.

The Goodluck Jonathan government, it added, also failed to collect tax on the transfer of ConocoPhillip Oil Company Nigeria Limited to Oando Hydrocarbon (Now Oando Oil Limited) through the acquisition of the shares of ConocoPhillips in Canada for $1.79 billion. The shares were acquired by Oando Energy Resources Canada.

SERAP called on the authorities to urgently “recover any possible past-unpaid dues, and for improvement in the collection and estimation of Capital Gains Tax in the Nigerian oil sector.

SERAP’s Senior Legal Officer, Bamisope Adeyanju, said: “Some companies pay a Capital Transfer Tax to DPR when obtaining approval for transactions.

It should, however, be noted that Capital Transfer Tax does not exist in Nigeria as it was repealed many years ago. There must not be a collection of a non-existent tax charge.

“The FIRS should verify and confirm the claims by divesting company that the divestment is by a sale of shares. However, it would appear that the main document that could reveal the basis for the divestment, being the sale and purchase agreement, is yet to be provided by either of the parties, even after the deal has been concluded.

“The ability of the Federal Government of Nigeria to adequately collect its fair share of tax from companies arising from disposal of oil and gas upstream assets is undermined, thereby reducing the potential revenue generation from the sale of assets in the upstream oil sector.

“Capital Gains Tax should also be administered and managed transparently and accountably to reduce revenue loss and maximise government take from the oil and gas sector. The 30 per cent rate on the capital gains realised on disposal being proposed under the National Petroleum Fiscal Policy Proposal (NPFP) document should be amended as a rate change in the CGT Act for the oil and gas sector only in the appropriate investment climate.”

Similarly, the Facility for Oil Sector Transparency and Reform (FOSTER), in a recent report, put the total worth of onshore fields sold to Nigerian entities between 2005 and 2015 at $8.6 billion.

It said claims of divestment by sale of shares by some oil firms were not verified and confirmed by the FIRS. According to it, the sale and purchase agreement (the major documents that could reveal the basis of the divestments) is yet to be provided even after the conclusion of divestment deals.

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