The Federal Government says it intends to recoup over N553 billion in unremitted taxes from international petroleum shipping companies operating in Nigeria.
The Director, International Tax, Federal Inland Revenue Service (FIRS), Mr Abdullahi Aliyu said that recouping the sum which accrued between the years 2010 to 2019 would help address the nation’s budget deficits.
Aliyu noted that with the nation’s overall budget deficit of N11.34 trillion, the N553 billion unremitted taxes represents 5.03 percent and was a viable alternative to addressing the Nigeria’s economic woes instead of borrowing.
Aliyu said this while speaking at a virtual summit organised by the Nigerian Chamber of Shipping (NCS) on Wednesday with the theme; “Sensitising the Nigerian Maritime Industry on the New Tax Policy and Objectives”
The FIRS draws its legal backing from Section 14(1) of the Companies Income Tax Act (CITA), titled “Companies engaged in shipping or air transport”.
It states that: “Where a company other than a Nigerian company carries on the business of transport by sea or air, and any ship or aircraft owned or chartered by it calls at any port or airport in Nigeria, its profit or loss to be deemed to be derived from Nigeria shall be the full profits or loss arising from the carriage of passengers, mails, livestock or goods shipped or loaded into an aircraft in Nigeria”,
At the summit, the International Association of Independent Tanker Owners (INTERTANKO), the International Chamber of Shipping (ICS), indigenous ship-owners, tax experts, among others called for more clarity and time for operators to understand the Nigerian tax regime.
The global bodies also claimed that their members were not aware of the tax provisions and public notice given by FIRS, and expressed fears on Nigeria’s insistence on recouping taxes on previous transactions between 2010 and 2019.
Aliyu, however, noted that shipping companies involved in dry cargo activities in Nigeria and foreign airlines had been complying with the same tax laws that most operators in the oil sector had neglected.
“The onus is on global businesses to understand the local laws and taxation in the countries where they transact business, and this specific laws have been in place in the nation for decades.
“Nigerian taxes are more favourable to non-residents compared to indigenous companies, thereby creating an unfair business environment for local operators,” he said.
In his paper presentation, the Assistant Director, Tax, FIRS, Mr Oluwole Oni pointed out that the agency had advertised the planned taxation exercise in December 2021 to prevent disruptions in the essential global shipping business.
“Non-resident vessels earn freight income for the transportation services provided in transporting the petroleum products (crude oil and gas products) from Nigeria to the agreed location, outside of Nigeria.
“Irrespective of the commercial arrangement adopted by the non-resident vessels to lift crude oil from Nigeria, the freight income attributable to Nigeria, is taxable in line with provisions of the Companies Income Tax Act (CITA),” he said.
Oni said that the FIRS had written officially to operators who owe taxes for the period between 2010 and 2019, adding that the companies are expected to send in their responses within 30 days.
“Those who received the letters are expected to send in their responses which isn’t only about payment. The response could be an acknowledgement of receipt, a demand for clarification, payment, etc.
“The first step to compliance is registration with FIRS and most operators are yet to register,” Oni said.
On her part, the Senior Advisor for Shipping Policy at the ICS, Georgia Spencer-Rowland stated that the communication on the tax regime was not properly carried out as most members of the ICS are oblivious of the tax framework.
Noting that the members of ICS comprise over 80 per cent of the world’s merchant ships and 40 national ship-owners associations, she encouraged the FIRS to clearly communicate in an official document the period allotted as grace period for the tax implementation.
“Do these taxes affect inbound or outbound ships? Are the taxes payable on freight, income or profits? Will ICS members as stakeholders be allowed to participate in the Presidential Technical Committee ahead of the implementation of these taxes?” Georgia asked.
Meanwhile, the Legal Counsel to INTERTANKO, Ms Selena Challacombe, remarked that the figures and volumes quoted by FIRS for taxation was not the actual figures in the transactions carried out by INTERTANKO members.
Challacombe equally hinted that there could be challenges in recouping taxes with the figures for 2010 to 2019 as ship charterers are unlikely to provide the vital information seen as germane to their businesses.
She said the situation should not be termed tax evasion when the alleged violators had not profited from the negligence of taxes they never knew existed.
She added that Australia had a similar law enacted since 1936 and members of INTERTANKO factored in the taxes when undertaking contracts for Australia.
In his welcome remarks, the President of NCS, Mr Aminu Umar stressed the need for collaboration among stakeholders and government agencies for a smooth implementation of the taxation.
Umar noted that the chamber was willing to partner with the government in its bid to collect revenue for national sustainability, but added that there must be collective input to rightly shape the shipping sector and encourage investments.
He also described the Presidential Technical Committee for the implementation of taxation as an ideal avenue for collaborations between local and global shipping operators as well as government agencies to advance the nation’s maritime sector.
Other dignitaries who attended the summit were; President of the Ship Owners Association of Nigeria (SOAN), Dr Mkgeorge Onyung; Vice President of NCS, Ify Akerele; President, Nigerian Ship-owners Association (NISA), Mr Sola Adewumi; among others.
