. Grill Citi, Fidelity banks over currency transfers, summon FIRS
Joint Committee of the House of Representatives on Finance, Banking and Currency yesterday said that Nigeria lost about $30 billion from 2005 to 2019 annually from revenue leakages.
The leakages the lawmskers said were mainly from activities of agencies and companies in banking, oil exploration, engineering, procurement, construction, installation, marine transportations, manufacturing and telecommunications upon which the Committee noted significant foreign exchange and revenue shortfall infractions against the country.
To this end, the Committee grilled the management of Citibank and Fidelity bank over several of the alleged infractions, accusing them of compromise.
The Chairman of House Committee on Finance and leader of the joint Committee, Hon. James Faleke in his remarks at the investigative hearing on the allegations said the the House at its sitting on March 5, 2020, resolved to conduct an investigative hearing on revenue leakages in excess of $30 billion.
He said: “The necessity and commencement of this investigation was as a result of growing problems in the financial management of all the God-given resources in our country, Nigeria, from our vast natural resources to the value added by these resources in the form of foreign exchange earnings and revenue generation etc. into these investment environment and opportunities.
“Thus, this Committee deemed it imperative to investigate revenue leakages and loopholes in the system, that have contributed to a loss of over $30 billion dollars in annual federation tax revenue between 2005 and 2019.
“The investigation therefore, was premised on the documents received from target agencies and companies in Banking, Oil Exploration, Engineering, Procurement, Construction, Installation, Marine Transportations, Manufacturing and Telecommunications upon which the Committee -noted significant foreign exchange and revenue shortfall infractions against the Federal Republic of Nigeria by these stakeholders.
“This places an imperative need to put an end to, or at best, minimise all attributable infractions that have been instruments in the hands of some stakeholders in bringing economic woes to this country and her people.
“During our documentation compilation and a further look at the economic woes caused the country by some companies, the Committee has noted the following major infractions which have multiplier effects on other infractions:
“Liftings of some crude oil and gas by oil exploration companies, that were not wholly and legally allocated to the Consignors in JV, PSC and PSA exploration activities including those whose crude oil Certificates of Quantity were not signed by the Department of Petroleum Resources and terminal operators.
“Concealment and non-disclosure of some crude oil liftings that ought to have been subjected to Petroleum Profit Taxation at PPT rates ranging between 50% of profit for PSC and PSA companies, and 85% of profit for JV companies.
“Inflow of foreign investments in the form of equity, foreign cash loans, equipment loans whose utilizations are majorly subject to tax, end up in transactions, foreign transfers that were at variance with the purpose of such inflows.
“Overnight and fictitious disappearance of Naira proceeds of foreign inflows from the bank accounts of Nigerian beneficiaries, and subsequent allocations of foreign exchange by CBN for Capital repatriations, Principal loan repayments and Interest payments.
Multiple foreign exchange allocations to holders of foreign inflow Certificates of Capital Importation (CCI) over and above the amount brought into the country, leading to capital flight of the country’s much needed and scarce foreign exchange.
“Loan backed Certificates of Capital Importations without evidence of transfer to the foreign lenders in the form of principal repayment and interest payments.
“Some expected imports that were funded by foreign equipment loans and other direct allocations of foreign exchange for foreign exchange valid transactions were neither translated to imports nor their import duties paid to the Nigerian Customs Service.
“Capital Flight using the FORM ‘M’ valid for Forex and Forex obtained by the beneficiary companies without utilization of the Forex to reflate the economy and taxes paid
“Export proceeds for both Oil and other commodities repatriation by exporters meant to reflate the economy which were diverted by selling directly to other customers without corresponding taxes paid
“The Committee shall extensively review all of the above infractions among others, to ensure that all federally collectible revenues are not only identified and recovered, but also to sanction companies involved in the other non-civil infractions in order to serve as a deterrent to potential classmates of the affected companies.
“These measures shall in the foreseeable future, lead to plugging all revenue loopholes, toward saving the country from recurring upsurges in foreign exchange rates”.
Interfacing with the representative of Citibank, Ngozi Omoke on the allegations, the Committee accused the bank of not making remittances to the federation accounts from certain transactions.
The Committee also picked holes in the presentation made by the representive of Fidelity Bank, Hassan Imam, saying there were many irregularities.
Some of the infractions listed against the banks included outstanding withholding tax collectible on Form A :2, 544, 973, 484 dollars; outstanding VAT collectible on Form A 1, 081, 383, 885 dollars; outstanding withholding tax collectible on known Form A bank transfers by customers 927, 556, 300 dollars; outstanding VAT collectible on known Form A bank transfers by customers from your bank is 463, 778, 150 dollars; breakdown of foreign exchange leakage infractions on form A transactions filed with CBN as taxation services but not traced to the Federal Inland Revenue Service collection platforms 171, 256, 297 dollars and Foreign exchange inflow from capital importation yet to be accounted for in the foreign exchange sales voucher is a 17, 655, 410, 376 dollars.
Others were Form A transfers for loan repayment and interest with no evidence of capital importation and payment of withholding tax on interest 210, 013, 266 dollars; Capital importation on loans with no evidence of principal repayment and interest payment 1, 072, 868, 110 dollars; Capital importation on equity with no evidence of dividend payment and capital repatriation is 1, 134, 835, 320 dollars; Dividend transfers in excess of capital importation on equity without payment of withholding tax is 3, 027, 298, 192 dollars; Form A transfers for dividend repatriations with no evidence of capital importation, either foreign equity and payment of withholding tax is 305, 725, 840 dollars.
Others were Foreign transfers for principal loan repayment and interest payment in excess of capital importation loan without payment of withholding tax on interest in 110, 635, 050 dollars; Foreign exchange on Form A transferred payment filed with the committee but not traced to CBN returns without payment of taxes is 510, 816, 573 dollars; Foreign transfer payment by customers to other bank accounts without Form A documentation is alleged to be 30, 720, 856, 807 dollars; Foreign exchange purchased from oil export process yet to be accounted for in the foreign sales voucher is 132, 878, 000 dollars.”
Faleke further stated that the Committee discovered that Citibank has Form A transfer by customer through their bank accounts that were not filed with the CBN and committee with no evidence of withholding tax amounting to 3, 107, 398, 073 dollars.
The Committee also disagreed with the bank’s position on advertisement, saying it was a taxable item.
Faleke therefore directed the bank to make available all the receipts of various transactions.
It also directed the Clerk of the Committee to write to the Federal Inland Revenue Services, FIRS to appear before it to confirm the remittances.
Responding to the allegations, Mrs. Omoke said the bank conducted its activities within the foreign exchange monitoring and miscellaneous provision act
She said: “I will just say in a summary before I go to specifics which is also our presentation is that we are guided by the foreign exchange monitoring and miscellaneous provision act and from time to time, the central bank as well issues guidelines to regulate transactions on foreign exchange. And it is in the light of this that we have reviewed all the allegations and the transactions mentioned in the report sent to us and we want to affirm again that we were not in any way in contravention of any of the guidelines in the Act or in the Foreign exchange manual.
“If you permit me, sir, I will just take the items one by one as read before. The first is outstanding withholding tax collectible on form A transaction. The total in this regard is 2,544, 973,484.04. we we noticed that the Committee or whoever computer this applied the total amount that was remitted and applied certain rate which is either 10 percent or 5 percent to arrive at at the potential withholding tax or VAT. A lot of transactions that were documented or mentioned do not attract withholding tax or VAT. So, if I give some examples which you said here transactions under the following items are not subject to VAT or withholding tax: Advertisement, airline remittances, principal loan repayments. What attracts withholding tax is interest on loan repayment not the principal itself; education, credit card, home remittances, BTA and so on.
“It should be noted that payments made on the basis of Form A by banks to customers are not payments for services rendered to the bank itself. I am glad that the chairman also mentioned it when he was speaking.
“So, withholding tax for the purposes of this amount that has been alleged here applies only to dividend remittances and interest on loan repayment or sometimes when there are consultancy on related transactions. Those are the only ones that attract withholding tax as guided by foreign exchange miscellaneous act and FX manual. So in total, if I can speak to this amount, 2. 5, only 1. 29 billion dollars and 357 million naira were eligible for withholding tax and in those cases they were duly deducted and remitted to appropriate authorities.”
Similarly, Imam who is the Executive Director, North of Fidelity told the committee when confronted with the allegations that the bank only makes transactions and would not be in a position to know what their customers do with their funds.
