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‘Nigeria loses N90b to tax evasion in auto industry’

By on March 14, 2013

THE country may have lost over S550 million (N90 billion) to tax evasion through gray market operators in the automobile industry, since 2008.

The loss figure was contained in a report just released by Lagos-based Financial Derivatives Company Limited (FDC),after a survey of the nation’s import profile, during the period under review.

FDC’s managing director and chief executive officer,Bismark Rewane,described the loss as”mind boggling”,saying the figure was equivalent to 4.5 per cent of the total exports of Kenya or four per cent of the total exports of Ghana.

“This amount could fund the construction of one petroleum refinery or a modern power station with 1000 Mega Watts capacity”,he said.

Rewane explained that gray market thrives when goods are imported inappropriately into an economy without the manufacturer’s consent, thereby short-changing the authorised dealers.

The authorities of the Nigeria Customs Service (NCS) had claimed to have surpassed the projected revenue over the same period due to some stringent measures put in place to check leakages of revenue.

The Comptroller-General OF NCS,Abdulahi Inde Dikko had attributed the feat to the stringent measures he put in place to closely-monitor revenue performance and block leakages. These measures,according to NCS comptroller-general,Abdulahi Inde Dikko,included the creation of a System-Audit Unit in the headquarters to monitor duty payment in all ports; the automation of the entire customs clearance procedure which allows for faster and smoother clearance;and the improved quality of customs workforce.

However, Rewane said the revenue loss was too staggering when viewed on a leveraged basis of one is to three,saying it can finance the rehabilitation of two seaports and two modern airports.

According to him, while direct tax loss comes from the reduced sales and profit in the legitimate automobile industry, indirect tax loss comes from the custom duties and excises.

“The bulk of the loss comes from the indirect taxes based on FDC’s survey. Recent data from the CBN shows that a fall in customs and excise duties was one of the reasons the Federal Government non-oil receipts declined by 30.3 per cent to N589.98billion in the last quarter of 2012.

“From our investigations, the continuous decline in government customs receipts can be due to either a reduction in national import, or to increased importation through the gray market, leading to avoidance of duty payment by gray market operators and corruption at the ports.

“Data collected from the Nigeria Port Authority (NPA), Manufacturers Association of Nigeria (MAN) and through independent survey of the automobile industry shows that grey import is striving and almost at par with official import volumes. Loss to government from grey import is N85.2bn between 2008 and 2011.”

Rewane said in some cases, automobiles that are destined for land-locked nations such as Burkina Faso, Niger, Chad and trans-shipped through the ports find their way to the Nigerian market and custom duty payment avoided in the process.

According to him, the FDC Lagos urban inflation rose by 1.39 per cent to 12.77 per cent in February from 11.38 per cent in January.

He said the increase was mainly attributable to a rise in the prices of a few items with higher weights in the index.