Tuesday, 6th December 2022
<To guardian.ng
Breaking News:

Government loses N475.8b to abuse of tax waiver scheme

By Roseline Okere
16 June 2017   |   4:34 am
Specifically, the Nigeria Extractive Industries Transparency Initiative (NEITI) put the figure at $1.17 billion between 2009 and 2014. But between 2014 and 2016, the figure rose to $1.56 billion.

Executive Secretary of the Nigeria Extractive Industries Transparency Initiative (NEITI), Mr. Waziri Adio

• Experts, group seek withdrawal of special incentives
• Govt suspends pioneer status to firms

The Federal Government lost over (about N475.8 billion) to the granting of tax waivers under the pioneer status scheme to oil and gas companies in the upstream sector between 2009 and 2016.

Specifically, the Nigeria Extractive Industries Transparency Initiative (NEITI) put the figure at $1.17 billion between 2009 and 2014. But between 2014 and 2016, the figure rose to $1.56 billion.

The granting of pioneer status to a company in Nigeria is aimed at enabling such a company operating within the pioneer industry to make significant capital expenditure and a reasonable level of return of profit within its formative years without having to pay tax.

Experts believe that the government should revoke taxes, incentives and waivers already granted to companies and the revenue be used to achieve economic recovery. Due to the abuse of the scheme, Nigerian Investment Promotion Commission (NIPC) has temporarily suspended the pioneer status pending a comprehensive review of the scheme, with a view to increasing transparency.

Some of the oil companies, which have or are still enjoying the pioneer status in Nigeria are Seplat Petroleum Development Company; Allied Energy; Midwestern Oil & Gas; Brittania Oil Nigeria Limited; Suntrust Oil Company Nigeria Limited; and Niger Delta Petroleum Resources Limited.

Already, about 10 electricity companies, which include Akute Power Limited, Alausa Power Limited, Geometric Power Limited, Greenfield Intergrated Energy and Ibom Power Company Limited are under investigation. Others are Isolo Power Gen Limited; Kotco Power Industries; Omega Power Limited; Tower Power Utility Limited; and Ughelli Power Plc.

Some oil and gas firms have also been invited to defend their stand on the abuse of pioneer status. They include Elcrest Exploration and Production Nigeria Limited; Premier Petroleum; Novo Gas Limited; Encrest Exploration and Production Nigeria Limited; Nextee Oil and Gas Nigeria Limited; Network Oil and Gas Limited; and Navas Gas Limited.

The Guardian learnt that the Nigerian Investment Promotion Council (NIPC) has on several occasions, granted the pioneer status retrospectively, thereby causing the government to even refund taxes already paid by the companies, which has cost the Federal Government about N1.850 trillion in revenue.

It was learnt that NIPC has issued pioneer status certificates to companies other than those envisaged by the law, including petroleum and production companies. NIPC has even allegedly granted companies for five straight years contrary to extant laws and has also granted unwholesome extensions and even further granted the status to companies that previously benefited from the grant.

But the Executive Secretary and Chief Executive Officer of NIPC, Mrs. Saratu Altine, told The Guardian that she was not aware of any abuse of pioneer status. Her words: “Pioneer status has been subject to an administrative suspension aimed at increasing efficiency and transparency. The suspension is expected to be lifted once the ongoing critical reforms are concluded.”

Worried about the revenue lost to the granting of pioneer status to companies in the country, the National Assembly has begun an investigation into the alleged abuse of the pioneer status by companies. Already, some of the nation’s electricity firms, including oil and gas companies that participated in the pioneer status process have been invited to submit their memoranda to a committee raised by the lawmakers.

On the benefits of the special status to Seplat Petroleum Development Company, its Chairman, Dr. Bryant Chukwueloka Orjiako, said that the company had fully re-invested the tax savings from the grant and had delivered verifiable results thereto.

According to him, Seplat is now a key supplier of gas to the domestic market, which is the direct outcome of the pioneer incentive granted to it, and the company aims to continue to contribute meaningfully to the growth and development of the economy.

The Executive Director, Civil Society Legislative Advocacy Centre (CISLAC), Auwal Ibrahim Musa, stressed the need for the Federal Government to revoke all the taxes, incentives and waivers granted companies operating in the country. There is no way we can continue to give this kind of incentives without any commensurate benefits for the country. We realised that it is another way of depriving the Federal Government the opportunity to raise revenue. This is because this incentive is going to the wrong people and they are making a lot of profits without any efforts in the development of the country. At the end of the day, the government is still the one providing the facilities. There is the need to review this policy of granting companies tax incentives because it is not in the interest of the nation.”

An oil and gas analyst, Ifeanyi Izeze, stated: “If only some of these foreign operators in this country would come to terms that the prevailing business environment is no longer the same with what obtained when they did what they liked in the days of Oloibiri and Ogoni and fed us with all sorts of lies to confuse our government more, they would be more careful in the manner they conduct their businesses locally here.”

The Managing Director of Ascension Consulting Services, Azeez Alatoye, while analysing the pioneer status, stated: “It is noticeable that the award of pioneer status incentive to these companies has tremendously improved the development of their oil wells, as they have been able to re-invest the tax savings resulting in noticeable increase in production.

“This should translate to increased Petroleum Profit Tax (PPT) to the government when the companies start paying PPT, as well as increased net profit after tax to the companies.”

A tax expert who spoke with The Guardian on the condition of anonymity advised the listed entities to document all relevant information supporting the grant of the pioneer status certificate, and show that none of the provisions of the Act or NIPC Regulations has been contravened.

The expert also urged companies which have been granted pioneer status certificates but have not been invited for clarification to prepare similar documentation for future purpose.