August 26, 2019

Multinational tax avoidance

The Australian Taxation Office has hit the British-Dutch oil giant Shell with a bill estimated at $755m as it continues to pursue multinational resources giants over claims they have avoided paying tax on offshore gas projects. Court documents reveal Shell’s main Australian company, Shell Energy Holdings Australia, has been fighting the ATO for six years over tax on the company’s stake in the $30bn Browse gas project off the coast of north-west Western Australia. The ATO’s pursuit of Shell is part of a broader effort to shake money out of big oil and gas projects that one of the authority’s most senior officials says has brought forward tax revenue by a decade. Second commissioner Jeremy Hirschhorn declined to comment on the Shell dispute but said he was “very confident” big oil and gas projects would start to pay significant tax by 2021. In an interview with the Guardian, Hirschhorn also revealed that every year the ATO received an average of two leaked sets of data about the clients of accountants, law firms and other service providers around the world, and expressed relief at victory over mining group Glencore this month in a high court fight over the ATO’s use of Paradise Papers documents. The previously secret Shell stoush is revealed in documents the company filed in the federal court this month after the ATO threw out its objections in June and July. Shell has asked the court to set aside the ATO’s decision to disallow $2.2bn in deductions the company has claimed for buying shares of gas tenements from another partner in the Browse project, Chevron, in 2012 and 2014. Browse, Australia’s largest untapped conventional gas resource, has been in development for 15 years but has never entered production because of falls in oil and gas prices. Tax law requires an asset to be used for exploration or mining before a deduction can be made. However, Shell told the federal court it “used each asset by having it ‘held in reserve’ or otherwise held ready for use in its business”. A Shell spokeswoman said the company was “engaging with the Australian Taxation Office with a view to confirming the correct tax outcome of Shell’s 2012 acquisition of interests in the Browse project”. “Shell complies with all its legal and taxation obligations and is committed to paying the right amount of tax under the letter and the spirit of the law in all countries in which we operate,” she said. Hirschhorn said the ATO acted early to squash the efforts of multinationals to send profits reaped from Australia’s oil and gas boom offshore without paying any tax in the country. Two years ago, ATO officials were alarmed at the prospect that the big oil companies would avoid paying up to $10bn in tax over 10 years by pumping up the interest rate they paid on loans their local arms took out with offshore affiliates to finance the mega-projects. However, a legal victory over Chevron, the lead partner on the country’s biggest project, Gorgon, emboldened the ATO to take on the rest of the industry. Last year, Chevron paid the ATO $866m to settle the lawsuit, which alleged the 9% interest rate charged on a US$2.5bn inter-company loan was far too high. In December last year, Hirschhorn was promoted from deputy commissioner in charge of large companies to second commissioner for client engagement – a euphemistic title that puts him in charge of tax enforcement and about half the ATO’s 18,000 employees. He declined to comment on the Shell case but said the ATO continued to take action over related party debt and other tax issues in the resources sector. “Not all those disputes have washed through,” he said. He said it was natural that the big projects would pay little or no tax in their early years, due to the billions of dollars poured into building them that needed to be recouped before profits could be made. “Our success will be as a tax office if they start paying tax, very significant tax, in 2021, 2022, which we’re very confident will happen, rather than not paying tax up until the 2030s,” he said   Source: Guardian

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FIRS Fixes Deadline on Monthly Payments of VAT

The Federal Inland Revenue (FIRS) has fixed the 21st of every month as the deadline for the payment of Value Added Tax (VAT) by companies in Nigeria. This was revealed on Wednesday in a statement signed by Mr. Babatunde Fowler, the Chairman, FIRS. According to him, some companies have been found culpable of not deducting the tax from payments made to their distributors. He further explained that, in line with the Company Income Tax, the VAT was meant to be deducted before making payments, compensations or commission to company distributors. Fowler disclosed that, the discovery by the FIRS on the non-remittance of VAT has necessitated the deadline binding on all companies; especially those dealing with fast-moving consumer goods, bringing to their notice that, all compensations made to distributors in the form of commission and reimbursement through any means of payment; be it cash or credit note, as well as goods-in-trade must be subjected to VAT and Withholding Tax (WHT) system at the appropriate rate. He added that all VAT payments must be remitted by companies on or before the 21st of every month. Investigations reveal that the Value Added Tax is calculated at a flat rate of 5 percent on all goods and services sold in Nigeria. The WHT, on the other hand, is a system aimed at tracking down task payers as well as incomes which may not be reported by them. Section 7 of the VAT Act confers the power of administration of VAT on the FIRS, a Federal Tax Agency.   Source: Investor King

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FG’s proposed imposition of VAT

HE statement by Mr Babatunde Fowler, executive chairman of the Federal Inland Revenue Service (FIRS), that the service may, as from next year, ask banks to charge customers five per cent Value Added Tax (VAT) on online purchases leaves much to be desired. Though VAT is legal, being a product of the nation’s laws, its proposed imposition on online transactions has grave implications for the economy and deserves reconsideration by the government. Going by the laws of the land, every transaction within the country already have VAT built into it. For instance, every purchase made on Jumia or Konga, or every air ticket bought online, comes with a VAT because the seller is empowered by law to add VAT to the cost of purchase. According to Section 4 of the VAT Act 2007 (as amended), VAT is calculated at a flat rate of five per cent on all goods and services sold in Nigeria. Kaduna files fresh suit challenging El-Zakzaky’s medical trip to India In accordance with the Section 15 of the Act, subsection 1, businesses operating within the country are mandated to calculate the amount of VAT received from customers in a month and remit same to the FIRS by the 30th day of the month. The implication of this is that save for goods and services exempted from VAT, all those who buy goods and services pay VAT. So, if VAT is already built into the cost of an article, why should the FIRS ask banks to do another billing? Won’t that be double taxation? Given the position of the Act, the statement by Mr Fowler is suggestive of two things, desperation to increase the revenue generated by the service or arrant ignorance of the law from where he derives his powers as the FIRS boss. While both are regrettable, we are persuaded to believe that the former is the propelling force behind the proposed imposition.  Indeed, Fowler has not hidden his desire to increase the government’s tax revenue. That is okay. He should be applauded for that. And to his credit, since his assumption of office as the executive chairman of FIRS, the revenue of the service has been on the upswing. However, his determination to enrich the government should not be at the expense of citizens and businesses. The FIRS’s ability to continually generate tax revenue for the government is dependent on the prosperity of the people. So, in his quest to increase his service’s revenue generation, he should avoid killing the goose that lays the golden egg. Unless this proposal is nipped in the bud and prevented from becoming an enforceable law, it is going to injure the nation’s budding online businesses because many Nigerians, in order to avoid double payment of VAT, would resort to cash transactions and this has the potentiality of killing a whole industry. To say the least, the proposition will disincentivise Nigerians who are trying to energise the economy through their innovative activities. Then, for a while, the Central Bank of Nigeria (CBN) has been promoting cashless transactions which quite a number of Nigerians are buying into. If the FIRS, out of sheer desire to make more money for the government, distorts a policy that is already gaining ground, would that not amount to government agencies working at cross-purposes? To avert the disaster which the Fowler proposition represents, it is best to stop it dead in its tracks.   Source: The Tribune

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Tax dispute: MTN engages KPMG to tackle FIRS

MTN has engaged the services of the KPMG to handle the demand for the payment of tax on the N330bn ($1.1bn) fine it paid to the government, investigation has shown. The company had confirmed having a technical disagreement with Federal Internal Revenue Service regarding tax deductions from the fine. Sources close to the company confirmed that the telco had to hire the KPMG because it needed a professional firm conversant with Nigerian tax matters to handle the dispute with the competence required. The Nigerian tax tribunal is looking into the disagreement between the telco and the FIRS on whether the fine paid by the company to the government should be subjected to tax. It was gathered that the tax in dispute was being held in an escrow account pending the ruling of the tribunal. It was also learnt that the tribunal had been on the case for about one year. MTN, which  is Nigeria’ largest network operator, was fined N1.04tn  by the Nigerian Communications Commission for not meeting the deadline for deactivation of more than five million unregistered SIM cards in 2015. It, however, negotiated a reduced fine on  condition that it would list on Nigerian Stock Exchange. After four years, the telco completed the payment of the fine in line with a structured payment plan on May 31 and also listed on the country’s bourse on May 16 in fulfilment of the agreement. The network operator had said it took the disagreement on tax payment to a tribunal set up by FIRS Chairman, Babatunde Fowler, and a former Minister of Finance. The telco in a statement issued last week said, “MTN remains fully compliant with Nigerian tax laws and will abide by the findings of the tribunal. The company is committed to meeting its fiscal responsibilities and contributing to the social and economic development of Nigeria.” The company added that it would abide by the ruling of the tribunal whose decision is being awaited by the concerned parties.   Source: punch

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Edo to partner CITN on taxation

The Edo State Governor, Mr Godwin Obaseki, has said that the state will partner the Chartered Institute of Taxation of Nigeria to drive advocacy campaigns, so as to widen the tax net in the state. Obaseki said this when members of the Benin District Society of the CITN paid him a courtesy visit at the Government House in Benin City. In a statement, he explained that the collaboration would help the state government deepen advocacy programmes to sensitise members of the public on their civic responsibility to the need to pay taxes. The governor noted that the state government needed to expand its tax net to sustain its developmental strides, adding that focus in the past was corporate organisations, while neglecting about 70 per cent of the labour force and those who operated the Small and Medium Enterprises in the state. He said, “Government relies on the economic activities of its citizens for sustenance. This is done through taxation. We need to emphasise the need for citizens to develop a habit of paying tax. We also need to tweak the system so that owners of the SMEs will be conscious of the fact that they need to pay taxes.” Obaseki also noted that people who earned more in the society should pay more taxes while urging political leaders to pay stipulated taxes based on their income. He assured members of the institute of government’s support and promised that the state would allocate a parcel of land for the institute to build its Benin secretariat. The President of the institute, Dame Simplice, commended the performance of the Obaseki-led administration in setting up industrial clusters in the state to encourage production.  She noted that the institute was ready to partner  the Edo State Government in its initiative to improve revenue collection, urging the state to support some of its programmes, which included exchange programmes and study tours.   Source: Punch

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