Nigeria lost $1 trillion to tax evasion by multinationals in 2016 – Osinbajo

Nigeria lost about $1trillion last year to tax evasion and avoidance by multinationals, according to acting President Yemi Osinbajo.

Prof. Osinbajo made the disclosure at the end of the Federal Executive Council meeting on Wednesday, stating the country also lost about $178 billion to illicit financial flows in the last 10 years.

The acting President said that the losses informed the government’s decision to ratify the multilateral convention on tax related treaties to end profit shifting and tax evasion by multinational companies following a memo submitted by the Minister of Finance, Kemi Adeosun.

According to the memo, Mrs. Adeosun said the ratified conventions would enable Nigeria evaluate, amend and cancel existing treaties that are not beneficial to the country.

Mrs. Adeosun who also briefed the media alongside her counterparts in the Ministries of Information and Culture, Lai Mohammed; Power, Works and Housing, Babatunde Fashola and Transport, Rotimi Amaechi, said the convention would give Nigeria the right to amend, renegotiate and opt out of some of the treaties already signed by previous administration, that are not appropriate for Nigeria.

She said, “The benefits are the convention will swiftly modify existing bilateral tax treaties to implement tax treaty related matters in a cost efficient manner, instead of individual negotiations and amendment of the treaty.

“It will incorporate into existing tax treaties provisions that will prevent the granting of tax treaty benefit in an appropriate circumstance. It will address tax treaty abuse, promote transparency and drastically curtail illicit financial flows and ultimately increase government tax revenue.”

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“One of the means by which major companies evade taxes is a practice called base erosion and profit shifting, which means that the profit that was made in Nigeria using accounting methods to shift it to another country that has little or no tax laws.

“So, really the country in which profit was generated doesn’t get tax. They go and declare those profits in a country that has very low tax.

“There is a contact among the G-20 countries and the OECD (Organisation for Economic Cooperation and Development) to end this and Nigeria was part of those who negotiated this convention, and today council gave us permission to go and sign the convention,” she said.

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She said some of the existing tax treaties with a particular country may claim their national carrier would not pay tax in Nigeria and in exchange with Nigeria’s national carrier would not pay tax in their country, even when Nigeria does not have a national carrier.

Mrs. Adesoun said the government may not be able to retrieve all it lost to tax evasion by multinationals, pointing out that going forward government would tighten the noose to avoid reoccurrence.