Illicit financial flows include tax evasion, avoidance

Illicit financial flow is not only when monies are illegally taken out of the country abroad, but also includes when companies and individuals fail to pay appropriate taxes to government, the chairman of the Federal Inland Revenue Service (FIRS), Tunde Fowler, has said.

Speaking at the ongoing inter-ministerial meeting of the African Union High Level Panel in Illicit Financial Flows (IFFs) in Africa in Abuja on Thursday, Mr Fowler highlighted the components of IFFs in Nigeria.

They include proceeds from illegal commercial and business activities that lead to hiding wealth, evading or aggressively avoiding tax, and dodging customs duties and domestic levies imposed by government on services.

He said IFFs are often driven by criminal intent with the purpose of keeping the transactions from the view of law enforcement agencies or revenue authorities.

Monies acquired through bribery and abuse of office by public officials and other corrupt practices, he noted, are enormous and could have increased the level of tax revenues collected, to further embark on different developmental projects.

Mr Fowler identified other forms of IFFs in Nigeria to cover payments of expatriates staff emolument and remunerations and failure to declare such for personal income tax purposes such emoluments to the relevant tax authorities in Nigeria.

“Laundering of funds (often sourced illegally) through real estate transactions to acquire property in choice locations outside Nigeria; Illegal transfer of money out of Nigeria via unapproved channels; mispricing of goods and services transferred between interrelated Nigeria based companies and individuals to offshore based entities and individuals; profit shifting through excessive interest payments on foreign and locally sourced loans and mis-invoicing of imports and exports are also IFFs,” Mr Fowler said.

He said the FIRS has asked the Office of the Attorney General of the Federation and Minister of Justice for advice to prosecute about 114 companies. These companies deny owning certain lands, however, the Abuja Geographical Information System (AGIS), confirmed the lands were actually allocated to them.

“We (FIRS) has vowed to hand over these false claims by these companies to the Attorney General of the Federation for further action on the controversial lands,” he said.

Besides these controversial land allocations, the FIRS boss said total tax debts recovered from individuals and organisations between January 2017 and August 2018 stood at about N3.63 billon.

This consists of about N1.9 billion recovered between November 2016 and December 2017, in addition to about N1.731 billion since January 2018 to date.

On the Issuance of tax notification obligations to company income tax (CIT) non-compliant companies that own properties in Abuja, Mr Fowler said the FIRS issued about 2,672 demand notices out of which 653 of those are currently filing, with about N2.98 billion payments for demand notices for Abuja properties.

In his introductory remarks at the event, former South African president and chairman of the panel, Thabo Mbeki, said the menace of IFFs was of serious concern to African governments as annual losses from IFFs have risen from about $50 billion in 2015 to the current $80 billion.

President Mbeki said the challenge was for African leaders to work towards stopping the losses, to retain the revenues for the provision of essential developmental services to the people.

He said the inter-ministerial meeting was held to help AU member states review the progress so far recorded in implementing the recommendations of the high level panel contained in its final report submitted to the AU heads of state and government in 2015.