From Dennis Mernyi, Abuja
International Advocacy group, ActionAid, has accused multinational oil companies of fleecing Nigeria of $3.3 billion in tax breaks over the last 10 years through their joint investments in liquefied natural gas project.
Nigeria has a joint venture with Shell, Total and Eni to operate the liquefied natural gas project through Nigeria Liquefied Natural Gas (NLNG). The joint venture of the four shareholders leaves the Federal Government represented by the Nigerian National Petroleum Corporation (NNPC), with 49 per cent stake while Shell, Total and Eni have 25.6 per cent, 15 per cent and 10.4 per cent respectively in the project.
Based on this equity holding, the NNPC has $1.62 billion in the project, while Shell, Total and Eni have $845 million, $495 million and $330 million investment respectively. But in a recent public presentation of a report into the project titled: Leaking Revenue: How big tax breaks to European gas companies has cost Nigeria Billions, ActionAid, disclosed that the country was fleeced through the extraordinary tax breaks granted the companies after an initial five-year tax break elapsed.
According to the report, the massive tax break was enabled by a unique law passed in 1990, adding that it was a triple loss as the tax was broken in three parts, stretching 1999 to 2012. ActionAid stated that the tax holiday extension meant the loss of about $2 billion in revenue and the rolled over allowances where the same tax was effectively foregone twice, meaning that Nigeria lost a further $1.3 billion.
It added that tax foregone in the first five years was not counted, as this was the normal tax break. In addition, the report also noted that while tax holidays are normal, 10-year tax holidays, the type granted to Shell, Total and Eni, are not tailor-made laws like the type in this instance.
It also disclosed that the consortium is the only entity in Nigeria with seperate law defining its tax framework, adding that there are little publicly accessible information about how a special tax framework was created for the consortium.
No website exists where details of the tax arrangement of the project can be accessed.
“First came a regular five year tax holiday granted to most investors in Nigeria and second, an extension for a further five-years exceptionally allowed for this particular deal.
Thirdly, tax allowances that would have been used during the tax holidays were rolled over and exempted the companies from tax for a further two years,” the ActionAid report added.
The ActionAid Country Director in Nigeria Ms Ojobo Atuluku, while formally launching the report at Abuja Sheraton Hotels, recently, called for the review of the laws that granted the Consortium of the Nigeria Liquefied Natural Gas (NLNG) a ten year tax holiday as incentives to encourage a Gas Project in the country that has led to loss of revenue to the tune of over $3.9 billion.
These tax breaks according her were mainly granted to some of the biggest world\’s oil and gas companies including Shell, Total and ENI starting from 1999, with amount averaging twice the national budget for education, and thrice that of health care of last year.
She faulted the legislation that gave rise to granting tax holiday to NLNG and consortium for the gas project and suggested that even though, such laws are in place, they should have been reviewed to allow more revenue into government’s coffers for meaningful development.
However, NLNG had denied that contrary to ActionAid’s claim, the reality is that the Federal Government’s initial investment of US$2.5billion, bolstered by the associated tax incentives, has so far yielded over US$ 33 billion in the form of dividends, taxes and feedgas purchases for the country over the past 16 years, with an additional US$ 5 billion accruing through corporate spend on local goods and services during the same period.
The company according to Kudo Eresia-Eke
General Manager, External Relations Division paid $3.6 billion in Company Income Tax and Education Tax between 2014 and 2015. This is in line with NLNG’s corporate vision to help build a better Nigeria.