Prof. Bolaji Owasanoye, the former head of the Independent Corrupt Practices and Other Related Offenses Commission (ICPC), has learned that some businesses in Nigeria overpay their operating costs and pay back loans to avoid paying taxes.
Owasanoye made this statement on Channels Television’s socio-political program Inside Sources with Laolu Akande, which was broadcast on Friday.
Illegal financial flows and tax evasion, in his opinion, have taken on a new meaning as some businesses pay expatriates who allegedly work for them online to transfer money illegally from Nigeria to nations abroad.
The senior advocate claimed that some Nigerian businesses have sister businesses abroad but use transfer pricing to transfer money to those companies by increasing the price of the goods they charge the companies.
According to Owasanoye, illicit financial outflows account for 65% of Africa’s capital outflows.
“About $50bn to $80bn annually. Because of the size of its economy, Nigeria accounts for a sizable portion of it, he said.
“On the surface, commercial transactions, which appear normal, account for 65% of that. Multinational corporations conduct business in this way, and transfer pricing is the main channel for this.
When corporate entities trade among themselves while pretending to be unaware of their own situation, the same company is owned by the same number of people.
“Company A in Nigeria wants to purchase microphones from Company B in the UK. The cost of the microphones is $10, but they go up to $100 to defraud Nigeria, which has a strong economy.
It occurs in all sectors, but it typically occurs in the extractive sector, which includes those in oil, gas, gold, and solid minerals. It occurs in the fields of trade and consumer, telecom, banking, technology, and consulting services.
“A company wants to integrate technology, for instance. In Nigeria, IT (information technology) experts are available. After that, it comes to an agreement with some Country X outside of Nigeria IT experts who attend one meeting. The work is done entirely by the Nigerian experts. They write a $10 million bill and claim to reimburse the $10 million infenders. You’ve just changed your name to “Capital”.
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Owasanoye added that some businesses in Nigeria falsely claim to be paying off loans to specific foreign companies in order to avoid paying taxes. He claimed that those businesses regularly transfer large sums of money to foreign entities under the guise of revolving loans, but actually engage in illicit financial flows.
He continued, “Most African nations promote foreign direct investment, but some investments have a baggage.” You will lose more than you will gain from investments that incorporate such practices: they falsify records, conduct trades, and other things.
They report lower profits as a result of higher operating costs. They therefore prevented the tax authorities from deducting higher profits because, according to documentation, they’ve increased operating expenses in a deceptive manner and without authorization.
“Or someone says, “I need 200 expatriates,” and receives the expatriate quota for 200 and says, “I am paying them.” They don’t reside in Nigeria in the digital world; perhaps only 10 of them have, but they do so while making money for these people.
Even Nigerian businesses when they conduct exports are implicated, not just foreign ones. If you export 200 phone units, you are expected to return the money when you make money there. However, if you falsify the paper, you exported 1, 000 but wrote 200, you leave the payment for 800 and deny the government’s claim of revenue. Financial flow is illegal.
The former ICPC boss claimed that he has been working with the Federal Inland Revenue Service (FIRS) to train their staff and raise awareness of the methods employed by businesses to avoid paying taxes.
Source: Channels TV
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