Reps to investigate CBN, others over alleged $30 billion revenue leakages

The House of Representatives on Thursday resolved to investigate an alleged loss of over $30 bn annually as a result of revenue leakages arising from tax evasion, malpractices, misuse and diversion of foreign exchange allocations by companies and other entities for other purposes.

This followed the adoption of a motion sponsored by Rep. James Abiodun Faleke at the plenary on the need to investigate the disbursement of foreign exchange by the Central Bank of Nigeria, CBN, and other agencies with a view to determining the exact amount that had been lost by the government in the process.

The House resolved to conduct public hearing to look into the various originating documents maintained by Central Bank of Nigeria (CBN), Banks, Forex Dealers, Federal Inland Revenue Services (FIRS), Importers and other beneficiary companies as well as identify perpetrators and the atrocities committed based on verifiable documents obtained from the valuable records.

The investigation is also to 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 an agency of Government for the purpose of timely recovery into Government accounts.

While moving the motion, Rep. Faleke expressed concern over the low performance of the nation’s economy at this critical time and stressed the need for an urgent need to rescue the country from over 30 billion dollars annual revenue leakages.

The leakages he said arose from various malpractices in foreign exchange allocation to companies from sources such as CBN, autonomous, interbank, domiciliary and over the counter purchases for importation of physical goods, payments of foreign service vendors, dividend repatriation, foreign loans and interest payment including foreign currency-denominated contracts payment by companies in engineering, procurement, construction, installation, and marine transportations.

He said that in the last few years, Nigeria had not been able to fund capital aspect of its Appropriation yearly as a result of the 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.

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The lawmaker Faleke who is also the House Committee on Finance reminded the House of the fact that the crude oil price benchmark in 2020 Appropriation Act was put at $57 dollar per barrel while the price of crude oil in the international market has dropped to 47 dollars per barrel.

Rep. Faleke alleged Pro-forma 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.

He also alleged 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.

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

According to him, “in some cases, companies were allocated foreign exchange for the purpose of investment of same in other countries stocks like the United State Treasury Stock, that neither contribute to federally collectible revenue nor reflate the Nigeria economy”.

He also disclosed that there was a gross abuse of millions of dollars in forex allocation to companies for the purpose of payment of foreign vendors for services rendered in Nigeria while the companies were in most cases found to have evaded the then statutory 5% Value Added Tax (VAT) and 5% With Holding Tax accordingly.

Rep. Faleke alleged further that the value of imported physical goods, materials, and equipment on account of forex allocation by most companies were always under-declared to Nigeria Customs Service at the port of arrival in order to reduce import duty payable.

According to Faleke, “available verifiable information has it that 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”.

He further revealed that companies operating 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 an annual basis without any significant payment of all applicable Taxes, Levies.

Some of these companies are not incorporated in Nigeria nor have an affiliate in Nigeria as statutorily provided for in the Companies and Allied Matters Act.

The House Committees on Finance, as well as banking and currency who are to carry out the investigation, should 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 and advice the House on the statutory provisions/amendment for penalties as provided in the applicable Law for various related offences as a deterrent to others.

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