Reps unearth N1.218trn unilaterally deducted by NNPC to pay fuel subsidy

Members of the House of Representatives, on Thursday, uncovered the sum of N1.218 trillion unilaterally withdrawn by the Nigerian National Petroleum Corporation (NNPC) from the Petroleum Profit Tax (PPT) and Joint Venture (JV) Royalties for payment of fuel subsidy in breach of relevant provisions of the 1999 Constitution (as amended).

Section 80(1) provides that: “All revenues or other moneys raised or received by the Federation (not being revenues or other moneys payable under this Constitution or any Act of the National Assembly into any other public fund of the Federation established for a specific purpose) shall be paid into and form one Consolidated Revenue Fund of the Federation.”

Section 80(2) also provides that: “No moneys shall be withdrawn from the Consolidated Revenue Fund of the Federation except to meet expenditure that is charged upon the fund by this Constitution or where the issue of those moneys has been authorised by an Appropriation Act, Supplementary Appropriation Act or an Act passed in pursuance of section 81 of this Constitution.”

Section 80(3 and 4) further stipulates that: “No moneys shall be withdrawn from any public fund of the Federation, other than the Consolidated Revenue Fund of the Federation, unless the issue of those moneys has been authorised by an Act of the National Assembly. No moneys shall be withdrawn from the Consolidated Revenue Fund or any other public fund of the Federation, except in the manner prescribed by the National Assembly.”

Trouble started when Hon. Sergius Ogun (PDP-Edo) asked FIRS Chairman to: “confirm that DPR Royalty of about N529 billion and FIRS JV Petroleum Profit Tax of N689 billion between 2018 and 2021 was borrowed by NNPC to fund subsidy?

“When you gave your opening speech, you said something that when revenues are collected and paid into the FAAC account, it’s not the responsibility of FIRS to determine how the three arms of government will share. But what my colleague asked earlier was whether this moneys should get into FAAC first but here we have the record of NNPC borrowing petroleum profit tax and the JV Royalty. They are paying DPR JV Royalties and then JV PPT so they are borrowing these moneys to fund subsidies.

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“So, the question is, is that not illegal? Because this money is the federation like you mentioned earlier because these moneys should get into FAAC, it belongs to the Federation. So, if NNPC is taking that money to fund subsidy is that not illegal?

In his response, FIRS Chairman who was represented by the Coordinating Director, Compliance Support Group, Dr. Dick Irri, said: “what you have put before us is the money NNPC puts into subsidy. But what I was explaining to you is the road infrastructure from tax, that’s what we are concerned with.

“For the figure, I may not confirm that to you now, off-head as I’m seated here. What concerns FIRS is the road infrastructure credit scheme. That’s what we know, about subsidy, we don’t know anything about subsidy.”

In his intervention, Chairman, House Committee on Media and Public Affairs, Hon. Benjamin Kalu asked for the conditions under which NNPC sells crude oil in US dollars and sells crude oil in naira.

He said: “I have a report in my hand which says foreign exchange racketeering between NNPC, Central Bank of Nigeria (CBN) and FIRS on federation tax revenue with a loss of over N112.2 billion only in one year – 2017. In that year you will see January of about N10 billion, February N29 billion, N6 billion, N9 billion, N11 billion, all the rest. These are losses that accrued up to N112 to 51. What do you have to say about this particular racketeering, how do you explain that?”

While responding, the FIRS who denied the report said: “I think the racketeering that you mentioned I may not know about that because FIRS as organisation does not get itself involved in any tax revenue direct collection, because taxpayers pay moneys straight to the bank and it goes to CBN for PPT which we are saddled to administer, is paid in foreign currency and the currency of the transaction is remitted to CBN directly so FIRS doesn’t have any opportunity to interface with any taxpayers in money payment, talkless of getting into racketeering that is being alleged here. I can tell you for free.

On his part, Hon. Aliyu who presided over the session said: “How does the service assess the tax payable by the players in the oil and gas industry including the NNPC? You assess individuals, you assess corporations and then you demand for taxes. So, in your own assessment how do you assess the taxes payable to the Federal Inland Revenue Service from the oil and gas and particularly as it relates to companies involved in Direct Sales Direct Purchase?”

To this end, he requested documentary evidence of total PPT revenue and Joint Venture revenues collected by FIRS under the period under review for legislative scrutiny.

In his response, the FIRS Executive Chairman, Mohammed Nami explained that the statutory function of FIRS remains that of assessment (Section 55 of Company Income Tax Act), collection, accounting and enforcement of payment of taxes that are due to the government of the federation and any of its agencies that the law permits us to administer.

“All taxes collected by the FIRS are usually shared among the three tiers of government in line with the constitution of Nigeria.

“FIRS do not have the records of what these funds are used for by the three tiers of government both the federal and the subnation governments. The Service also does not have the powers to ask for such record i. e. the utilization of funds that were have been shared by the governments, both the federal and subnational,” he stressed.

On his part, Mr Bello Rasheed explained that Nigeria operates a self-assessment tax regime where every company is expected to file returns for a period of one year. When the company files the returns, we subject it to debt examination and first compliance level to find out whether the returns filed by the company is true and nothing but the truth. After that we go for a field audit, whereby we go to the company, we examine their records to compare it with what they have filed before. If there are information that suggests that there is a need to do further review by way of investigation, when we have information from Third Party, from industry player, from security, from the media; we now commence investigative activities on such a company. And there may be a need to raise additional assessments or there may be a need for prosecution if we establish a fraud. That’s our role.”

In his intervention, Hon. Mark Gbillah asked for a report on NNPC returns with respect to the sale of tax oil from 2017 to 2021, do you have it? Borrowings from FIRS by NNPC from FIRS and the borrowings were repaid from January 2017 to December 2021, do you have that?

He also requested details of all receipts in naira and dollar accrued from the sale of tax oil, crude oil between 2013 and 2021.

In his response, the FIRS Chairman who denied the knowledge of the borrowings by NNPC said: “NNPC did not borrow money from FIRS. Actually, the NNPC utilised tax payable for priority project and we made the submission in Appendix 2a, 2c.”

While noting that the funds expended by NNPC were drawn from the Petroleum Profit Tax from tax oil due from PLC, he observed that the “funds utilised was from the taxes NNPC suppose to pay to FIRS, they actually used part of it.”

Worried by the development, Hon Gbillah said: “From 2013 to 2021 we need to know how much that money was, what I want to put on record now, FIRS is that in your submission you were very brief, but we are all part of this commonwealth, we need to know. The Constitution provides that the monies are remitted into the federation account before any expenditure is made.

“But you are telling us that even without bringing the moneys to you first, NNPC is spending the money. And we need to know that approval, we need to know the reconciliation between you and them on that value of that amount that was expended. Did you approve by the President or who approved that NNPC should expend that money?”

On his part, Hon Isiaka Ibrahim who frowned at the breach of the constitution said: “By your submission can you tell me that deduction midway by FIRS and that of the NNPC as you claimed followed this constitutional provisions?”

In response, the FIRS Chairman explained that NNPC acted in consonance with the provisions of Order 007 approved by Mr President

“There’s recent Presidential order on infrastructural development that permits a certain level of taxpayers and it was really Federal Executive approved and certain big tax players to develop road infrastructure specifically and this is a recent development in Nigeria so to say.

“And this is when the like of Dangote for example, LNG for example, and NNPC recently started to develop infrastructural roads to aid what the government is doing and once this is done, investment credit Certificate is given to them to that effect.

“So, it’s not as if FIRS has powers to seed the money to anybody, we don’t have that power. Perhaps the issue of them keying into this presidential initiative maybe this question should go to them, why they were able to do that. Because I would not be able to explain here, using the constitution for me, but I know that there is this presidential order that some big taxpayers have keyed into and it is a recent development, about two or a year ago. It’s not that it started from 2013, that’s what I wanted to explain.”