Oil and gas companies must pay their taxes
The revelation last week that as many as 77 oil and gas companies operating in the country owe the government a staggering sum of $6.48 billion (about N2.3trn) in taxes came as a shock to every right-thinking Nigerian. In this era of a global move to get all persons – humans and corporate organisations – […]
The revelation last week that as many as 77 oil and gas companies operating in the country owe the government a staggering sum of $6.48 billion (about N2.3trn) in taxes came as a shock to every right-thinking Nigerian. In this era of a global move to get all persons – humans and corporate organisations – to embrace the habit of being socially responsible by paying their taxes, it is quite benumbing that this monumental scandal could take place.
It is clearly one of the biggest scandals to come out of Nigeria this year and calls for immediate action to get the offending organisations pay what they owe and appropriate sanctions applied where necessary.
Adding to the puzzle is the further revelation that the companies cut across both foreign and indigenous oil and gas firms. So it is neither a local nor foreign phenomenon; it is a general malaise that needs to be tackled headlong.
The announcement by the Nigerian Extractive Industries Transparency Initiative (NEITI) indicated that the debts arose from the companies’ failure to remit petroleum profit taxes; company income taxes, and education tax. Others include VAT; Withholding Taxes; royalty (oil and gas), and gas flare penalties and concession rentals.
That this large number of companies could be owing such a staggering sum to the government undetected for so long beats the imagination and begs the question of what the relevant regulatory agencies were doing. There is obviously more to it than the NEITI report has shown. The taxes involved are clearly statutory obligations of companies engaged in the extractive industry worldwide.
Such items as petroleum profit tax, royalty, and companies’ income tax are standard elements in oil and gas companies’ financial reports. For the exploration and production companies, for instance, they are part of the cost elements used in the calculation of the eventual price of a barrel of crude oil. Thus there can be no questions or ambiguities about the companies’ obligations or methods of payment.
Therefore, the first response to this embarrassing report is for the federal government to institute an inquiry to ascertain who played what role in this saga. Where was the Federal Inland Revenue Service and other relevant authorities when the companies were defaulting in their responsibilities to file their annual tax returns? What happened to the enforcement unit of the FIRS that 77 companies operating in such a visible industry could evade taxes for so long? Could it be that there were cases of cover-up or collusion involving officials of the agencies and the companies?
FIRS is busy hounding states over the collection of VAT. Ordinary Nigerians and smaller companies are paying taxes out of their meagre incomes, but here are companies operating in the country’s most important sector willfully dodging their core obligations to the society.
On the part of the companies, they must also answer the question as to what has happened to the slogan “Publish What You Pay,” under which companies operating in the extractive industries are obligated to clearly and transparently publish whatever amounts they have paid to the relevant authorities in the form of taxes.
The amount $6.48 billion (about N2.3trn; some say N2.6trn) is not just a mere figure. It is a resource with huge opportunity costs, and its absence or presence makes a significant difference in the lives of millions of Nigerians. There are countless areas where it can readily be deployed for immediate impact.
It is more worrisome that this unconscionable pillaging is taking place at a time when Nigeria is going cap in hand, borrowing. Is it not an irony that these companies are indebted to the tune of over $6b to a country that just borrowed $4b via Eurobonds sales a few days ago? A child born today will still be paying part of that debt by the time he or she turns 30 years.
As the NEITI Executive Secretary, Dr Orji Ogbonnaya Orji, pointed out, the debt owed by these companies could have covered the entire capital budget of the federal government in 2020, used to service the federal government’s debt of $2.68b in 2020.
These facts make the 77 companies’ failure to pay their taxes an urgent matter that must be addressed swiftly, with a view to ascertaining which other areas of the nation’s fiscal system such a thing is happening. No nation that hopes to make progress and meet its citizens’ needs can permit such a willful hemorrhaging in its finances.
The time to stop it is now!