The Federal Government lost about $1trillion last year to tax evasion and avoidance by multinationals, Acting President Yemi Osinbajo has said.
The Acting President, who was speaking at the end of the Executive Council of the Federation meeting on Wednesday, said the country also lost about $178 billion to illicit financial flows in the last 10 years.
He said the huge losses informed the government’s decision to ratify the multilateral convention on tax related treaties to end profit shifting and tax evasion by multinational companies.
The ratification of the treaties followed the approval of the memo submitted by the Minister of Finance, Kemi Adeosun, who said this was part of government’s plan to widen its tax base and improve revenue generation.
Mrs. Adeosun said the ratified conventions would enable Nigeria evaluate, amend and cancel existing treaties that are not beneficial to the country. Signing of the convention would also curtail illicit financial flows from and into the country.
Last year, the government said to address the problem, it would soon start to compel multinational companies operating in Nigeria to provide regular reports on their operations in other countries.
But the minister said the convention would give Nigeria the right to amend, renegotiate and opt out of some of the treaties already signed by previous administration that are not appropriate for Nigeria.
“The benefits are the convention will swiftly modify existing bilateral tax treaties to implement tax treaty related matters in a cost efficient manner, instead of individual negotiations and amendment of the treaty.
“It will incorporate into existing tax treaties provisions that will prevent the granting of tax treaty benefit in an appropriate circumstance. It will address tax treaty abuse, promote transparency and drastically curtail illicit financial flows and ultimately increase government tax revenue,” Adeosun said.
The Minister briefed the media alongside her counterparts in the ministries of Information and Culture, Lai Mohammed; Power, Works and Housing, Babatunde Fashola and Transport, Rotimi Amaechi.
She explained the administration’s focus on revenue generation and mobilisation as well as part of the work to improve its tax collection.
“One of the means by which major companies evade taxes is a practice called base erosion and profit shifting, which means that the profit that was made in Nigeria using accounting methods to shift it to another country that has little or no tax laws.
“So, really the country in which profit was generated doesn’t get tax. They go and declare those profits in a country that has very low tax.
“There is a contact among the G-20 countries and the OECD (Organisation for Economic Cooperation and Development) to end this and Nigeria was part of those who negotiated this convention, and today council gave us permission to go and sign the conventions” she said.
She said some of the existing tax treaties with a particular country may claim their national carrier would not pay tax in Nigeria and in exchange with Nigeria’s national carrier would not pay tax in their country, even when Nigeria does not have a national carrier.
Adesoun said the government may not be able to retrieve all it lost to tax evasion by multinationals, pointing out that going forward government would tighten the noose to avoid reoccurrence.
The transport minister said other decisions by the Council included approval for the completion of Baro River Port in Niger state in the next four to six months.
He said the Minister of works was also directed to look at the roads leading to the River Port, while his ministry would look at the revival of the narrow gauge to the Port, estimated to gulp about N500million.
Fashola said approval was given for the reimbursement of Kwara state government with about N7.943billion used for the construction of the Kayamashi road, which serves the Agricultural belt that produces Agro Product between Oyo and Kwara state.
The Kwara state government had applied to be allowed to fix the road on ground that they would be refunded later.
Fashola said the council also ratified an earlier approval given for General Electric to undertake the Afam emergency fast power project, which is part of the ministry’s roadmap for incremental power to the grid.
According to him, the project would see to the completion of 240MW of emergency power through 830MW turbines this year.
“Council also approved the contract for the construction and rehabilitation of the sub-station to enable the evacuation of the power, once the turbines are installed.
“The total package for the Afam power plant is $186.6 million and the contract for the substation is $2.207million for the components that are offshore and N133.184million for the local components,” he said.
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