Nigeria's leading finance and market intelligence news report.

Reps move to block $30b annual revenue leakages from forex allocations by CBN, Interbank, others

The House of Representatives has taken steps to block $30b annual revenue leakages arising from various malpractices in the foreign exchange allocations to companies from sources such as the Central Bank of Nigeria (CBN), Autonomous, Interbank and Domiciliary sources.

The leakage would also be blocked in the over-counter purchases for the importation of physical goods, payments of foreign loan and interest payments, including foreign currency-denominated contracts’ payments by companies in engineering, procurement, construction, installation and marine transportation.

* indicates required

To achieve this, the House directed its Committees of Finance and Banking & Currency to conduct public hearing by looking into the various originating documents maintained by Central Bank of Nigeria (CBN), Banks, Forex Dealers, Federal Inland Revenue Services (F IRS), Importers and other beneficiary companies.

These Committees are also mandated to identify the perpetrators and the atrocities committed based on verifiable documents obtained from the valuable records and determine in a statutory and in a professional manner, the revenue amount involved in the malpractices by each organization based on every revenue line item collectible by agency of Government for the purpose of timely recovery into Government accounts.

They are instructed to: “make a formal report of findings and provides necessary recommendations toward the correction and regularisation of the problems aimed at putting a stop to the menace in the future.

“Advise the House on the statutory provisions/amendment for penalties as provided in the applicable law for various related offences as a deterrent to others,” and to report to the House in 12 weeks.

These resolutions were sequel to the adoption of a motion on a matter of urgent public importance sponsored by James Faleke (APC, Lagos) during plenary on Thursday.

Moving the motion, Faleke said the House was aware of the low performance of the country’s economy at this critical time, and that in the past years Nigeria had not been able to fund capital aspect of its Appropriation year in year out for lack of funds due to low remittances of revenue by revenue-generating agencies, low payment of taxes by private companies and diversion of expected revenue by corporate organisations.

According to him, the House is also aware that the crude oil price benchmark in 2020 Appropriation Act was put at $57 dollar per barrel but the price of crude oil in the international market has dropped to 47 dollars per barrel, this clearly indicates that the major source of revenue towards funding the 2020 Appropriation Act is already in the negative.

The Chairman of the House Committee on Finance argued that the House was concerned that there is an urgent need to rescue the country from over $30billion dollars annual revenue leakages arising from tax evasion, malpractices, misuse and diversion of foreign exchange allocations by companies and other entities.

He said the House took cognizance of the following facts: “Pro-formal invoices overstatement by importers with the intention of obtaining large forex allocation above the international cost, insurance and freight value of goods, thereby increasing the domestic inflation rate.

“Fictitious transfer of forex allocation for the payments of dividends to foreign shareholders of Nigeria companies above the dividend approved by the company’s board of directors and audited accounts thereby leading to evasion of statutory 30% company income Tax thereof.

“Allocation of foreign exchange to companies for the repayment of principal foreign loan and interest that were in some cases found to be non-existing, but rather a fictitious loan backed by a mere packaged documents without evidence of utilization in Nigeria and related taxes paid.

“Companies in some cases were allocated foreign exchange for the purpose of investment of same in other countries stocks, i.e. United State treasury stock, that neither contribute to federally collectible revenue nor reflate the Nigerian economy.

“Abuse of millions of dollars in forex allocation to companies for the purpose of payment of foreign vendors for services rendered in Nigeria were in most cases found to have evaded the then statutory 5% VAT and 5% WHT accordingly.

“The value of imported physical goods, materials, equipment on account of forex allocation by most companies were always understated to Nigeria Customs Service at the port of arrival in order to reduce import duty payable and based on verifiable information, importers at the post-clearance stage do inflate the value of these items in their books in order to obtain frivolous capital allowance or expense claims from FIRS which ultimately deny the Government of much needed revenue from Company Income Tax and Education Tax.

“Companies in offshore engineering, procurement, construction, installation and transportation whose forex funding source are from cash calls and, operators sourced foreign loan do pay their foreign vendors billions of dollars in contract payments on annual basis without any significant payment of all applicable Taxes, Levies and likewise, these companies were not being incorporated in Nigeria nor have affiliate in Nigeria as statutorily provided for in the Companies and Allied Matters Act”.

 

Comments are closed.