Tax evasion: Tribunal orders firm to pay N1.7 billion to FIRS

The Tax Appeal Tribunal, Lagos Zone, has ruled as lawful, an assessment in additional tax liability of almost N1.74billion awarded against Prime Plastichem Nigeria Limited (PPNL), by the Federal Inland Revenue Service (FIRS).

The Tribunal believes the amount is the correct income tax, which PPNL should pay on its profit for doing business in Nigeria, under the provisions of Transfer Pricing Regulation No1 2012.
 
The tax court handed down this verdict in Appeal No. TAT/LZ/CIT/015/2017, instituted before it by PPNL, which disputed the FIRS’ additional tax liability assessment.

A statement by the Director, Communications and Liaison Department, FIRS, Abdullahi Ahmad, said the suit arose following disagreement between it and PPNL.

The suit by PPNL, a firm that “engages in the business of trading in imported plastics and petrochemicals,” and the FIRS on the Transfer Pricing Documentation filed by the PPNL “for 2013 and 2014” concerns PPNL’s “transaction with a related company, Vinmar Overseas Limited (VOL).”

While the PPNL “adopted the Comparable Uncontrolled Price (CUP) for its filing, the FIRS insisted that the Transactional Net Margin Method (TNMM), was the correct tax assessment tool to apply in this particular case.” 
 
Responding to the arguments by PPNL at the Tribunal, FIRS stated that PPNL “misrepresented information” to the Service “by stating that Vinmar International Limited (VIL), only engages in information collection and liaising activities on one hand, and on the other hand, its submission to the Tribunal stated that VIL engages in sales of similar products as itself the Appellant.”
 
This “misinformation”, according to the FIRS, indicated that “the controlled transactions with VIL were not at arm’s length” as claimed by the PPNL, hence cannot serve as a basis for calculating the PPNL tax liability, and the reliefs sought by the firm at the Tribunal. 
 
Adducing documentary evidence to support its claims, FIRS had told the tribunal that the PPNL assertions “in this matter is peppered with approbation and reprobation,” and amounted to speaking from “both sides of the mouth.”

This is because PPNL itself admitted in both oral and documentary evidences before the Tribunal that its “use of CUP method in 2013, was done in error,” hence the Appellant “changed the method from CUP to TNMM in 2014.”
 
Its submission appeared to lend credence to a recent revelation by the Executive Chairman FIRS, Muhammad Nami, that multinationals operating in Nigeria, have perfected a complex web of profit-shifting, especially in transactions linked with offshore corporate entities.

The FIRS therefore averred that “actual profits reported by the Appellant (PPNL) were well below what comparable entities operating at arm’s length would report.”