Mobil Producing Nigeria Unlimited has rejected the charge of N4.1 billion tax evasion brought against it by the government of Akwa Ibom State. Counsel to Mobil told the Revenue Court in Uyo, Akwa Ibom State last Thursday that his client has no valid case to answer because it is up to date in its tax obligations to the state. The case was adjourned to November 23.
Akwa Ibom State had taken Mobil Producing as well as five directors and officers of the oil company to court on November 6 for allegedly evading payment of N4.1 billion tax due to the state. The company and its officers were arraigned before Magistrate Benet Ilalumo of the Revenue Court in Uyo on a three-count charge of concealing personal income information of employees of the oil company and tax evasion amounting to N4.1 billion.
They were also charged severally and jointly with the offence of giving misleading information for 15 years to Akwa Ibom State government on the salaries and allowances paid to local and expatriate employees of the company, for the purpose of denying the state tax revenue amounting to N4.1 billion. Mobil was said to have succeeded in fooling state tax collectors by keeping off payroll on most of the allowances paid to its employees. All the charges are criminal offences punishable under the Personal Income Tax Act (PITA) of 1993.
Umana O. Umana, the state commissioner for finance, said the government went to court as a last resort, after all efforts in the last two years failed to persuade the management of Mobil to pay up. Umana explained that the huge tax evasion was uncovered in a painstaking investigation by the state Internal Revenue Service (IRS).
He said Mobil had initially denied any outstanding tax liabilities to the State when the findings of the state IRS were communicated to the management of the oil company. According to Umana, the oil company would later admit in a letter of June 23, 2006 to the state government that it had not disclosed all taxable allowances paid to its employees and sought amicable settlement of the issue.
The commissioner wondered why a multinational like Mobil Producing whose parent company, Exxonmobil, is the world’s richest oil company would elect to dodge payment of tax to its host government in its overseas operation. Umana accused the oil company of double standard by doing in Nigeria what it would not do in its native country America. He also said that what Mobil is doing in Nigeria-hiding information on staff pay in order to evade tax-is part of what fuel the crisis in the Niger-Delta: by denying government legitimate tax revenue needed for development of the area and not doing much itself in community improvement, the company is stoking the fire of youth militancy in the region.
But in a letter of September 20, 2006 and another of October 12, 2006 to the state government, Mobil made an about turn, denying ever owing the state any revenue in unpaid taxes and added that it even had clearance from the state government for taxes within the period complained of. It said the tax arrears demanded by the state had lapsed given the provision of the six-year limitation under the personal income tax law, and proposed a framework for the reconciliation of its consolidated tax liabilities to the state.
However, Mr. Bassey Dan Abia, the state attorney general and Commissioner for Justice, rejected the proposed template for the tax reconciliation in a letter of October 30, 2006 addressed to the Managing Director of Mobil Producing, explaining that the framework for reconciliation proposed by the oil company was unacceptable because it sought to start from an arbitrary date of 1998, whereas some of the allowances that were concealed for the purpose of evading tax were introduced in 1991. Abia argued that Mobil could not hide under the provision of limitation imposed by section 54 of PITA within which all tax assessment issues already dealt with automatically lapse after six years, because the section applies to tax audit, and not tax investigation which unearthed the disputed unpaid taxes of N4.1 billion.
He said there is no time limit for dealing with the criminal issue of tax evasion as made clear by the proviso to section 65(2) of PITA, which states: “Provided that where any form of fraud, willful default or neglect has been committed by or on behalf of a taxable person in connection with any tax imposed under this Act, the relevant authority may at any time and as often as may be necessary assess that taxable person at such amount or additional amount as may be necessary for the purpose of making good any loss of tax attributable to the fraud, willful default or neglect.”
Abia said the tax clearance given to the oil company was for 1997 only, and could not be construed to cover the whole period under dispute.