Control elite oil theft and tax evasion
The federal government’s call for collective action against crude oil thieves and the elite conspiracy against the Voluntary Asset and Income Reporting System (VAIDS) is timely. It has come at the most auspicious time that the nation needs more income. Nigerian National Petroleum Corporation (NNPC) group chief executive Mele Kyari recently accused a few Nigerians he described as “the elite” who annually steal more than 42 million barrels of crude oil worth $ 3.6 billion from the going price of $ 85 a barrel on the international oil market on the Internet.
The fact that Nigeria has yet to put in place a technological device that will record the exact daily production of crude oil could result in the stolen crude oil being much higher than reported. The NNPC boss broke the news of the economic sabotage at the 17th Nigerian Publishers Conference 2021 in Abuja. Besides the loss of revenue due to the theft of oil, the NNPC says it spends billions of dollars each year to repair and maintain pipelines vandalized by criminal activity.
In a related development, elite sabotage also followed the hitherto lauded VAIDS initiative. The government claims that this caused the much celebrated program to fall short of its goal. Launched four years ago, VAIDS aimed to give businesses and individuals the opportunity to regularize their tax situation relating to previous tax periods. The tax amnesty program was also designed to block notable leaks in the country’s tax system. Under this regime, taxpayers benefited from exemptions from overdue interest and penalties.
In addition, he offered a grace period between July 2017 and March 2018 for all defaulting taxpayers to voluntarily repay their arrears to the federal government coffers. The government had targeted 350 billion naira in revenue in two years to come from VAIDS, but only raised 70 billion naira in 2020. However, the Pandora Papers exhibit showed that some prominent Nigerians have invested their wealth in tax havens, allegedly to evade the payment of required taxes at home. . This is despite assurances in VAIDS guidelines that they will not be subject to any criminal prosecution.
It is disheartening that tax breaks in the country are still low despite the fact that Nigeria has some of the most profitable and best capitalized companies in Africa. Worse yet, some Nigerians have reportedly earned billions of dollars from the theft of crude oil at the expense of the economy. For example, in 2019, the Nigerian Extractive Industries Transparency Initiative (NEITI) said the country lost 42.25 million barrels of crude oil to the theft. This has increased inequalities in the country, with around one percent of the population controlling the country’s wealth. In addition, a recent report by the Oxfam group indicated that between 1960 and 2005 approximately $ 20 trillion was stolen from the Nigerian treasury by public officials, including politicians.
Due to the theft of crude oil and tax evasion, the economy has deteriorated and recovery may be distant. Last year, Federal Inland Revenue Service (FIRS) executive chairman Muhammad Nami revealed that between 2007 and 2017 Nigeria lost over 5.4 trillion naira due to tax evasion by multinationals doing business in the country . Foreign companies and the country’s tax authorities should be blamed for these financial embezzlements. The Nigerian tax system is fraught with corruption. The reported elite conspiracy constitutes an economic crime that must be fully investigated by the Economic and Financial Crimes Commission (EFCC), and those found responsible duly prosecuted in accordance with the laws of the land. Mere disclosure of oil theft and tax evasion is not enough.
The depletion of our foreign exchange reserves, reduced tax revenues, low investment flows and escalating poverty in the country must be quickly tackled. These are the engines of the current economic crisis. It bears repeating that until multinationals are forced to comply with our tax laws, the country will continue to experience huge revenue losses.
Sadly, the amount lost over the past six years due to corporate tax evasion represents over 40% of the 2021 budget. It will also be enough to close the budget deficit of 5.3 trillion naira. Therefore, we urge the National Assembly and the anti-corruption agency to control crude oil theft and tax evasion and put in place measures that will make tax evasion a crime with tougher penalties for all violators, including unscrupulous Nigerian tax officials. With low income generation and low investment in the economy, there is a need to restructure our tax laws to discourage offshore investment, while oil thieves are punished with dignity.