The Federal Government is planning to recoup over N553 billion in unremitted taxes from shipping companies operating in Nigeria in order to address the nation’s budget deficits.
With the nation’s overall budget deficit of N11.34 trillion, the N553 billion unremitted taxes represents 5.03 percent and it is seen as a viable alternative to addressing Nigeria’s economic woes in place of borrowing.
Abdullahi Aliyu, director of International Tax at FIRS, disclosed this while speaking at a virtual summit organised by the Nigerian Chamber of Shipping (NCS) themed, ‘Sensitising the Nigerian Maritime Industry on the New Tax Policy and Objectives.’
FIRS draws its legal backing from Section 14(1) of the Companies Income Tax Act (CITA), titled ‘Companies engaged in shipping or air transport’, which states that: “Where a company other than a Nigerian company carries on the business of transport by sea or air, and any ship or aircraft owned or chartered by it calls at any port or airport in Nigeria, its profit or loss to be deemed to be derived from Nigeria shall be the full profits or loss arising from the carriage of passengers, mails, livestock or goods shipped or loaded into an aircraft in Nigeria.”
Also, the International Association of Independent Tanker Owners (INTERTANKO), the International Chamber of Shipping (ICS), indigenous shipowners, and tax experts, among others called for more clarity and time for operators to understand the Nigerian tax regime.
The global bodies also claimed that their members weren’t aware of the tax provisions and public notice given by FIRS, even as they expressed fears about Nigeria’s insistence on recouping taxes on previous transactions between 2010 and 2019.
Aliyu, however, said that shipping companies involved in dry cargo activities in Nigeria and foreign airlines have been complying with the same tax laws that most operators in the oil sector have neglected.
He said that the onus is on global businesses to understand the local laws and taxation in the countries where they transact business, while he stressed that the specific laws have been in place in the nation for decades.
Oluwole Oni, assistant director of Tax at FIRS pointed out that the agency had advertised the planned taxation exercise in December 2021 to prevent disruptions in the essential global shipping business.
“Non-resident vessels earn freight income for the transportation services provided in transporting the petroleum products (crude oil and gas products) from Nigeria to the agreed location, outside of Nigeria. Irrespective of the commercial arrangement adopted by the non-resident vessels to lift crude oil from Nigeria, the freight income attributable to Nigeria, is taxable in line with provisions of the Companies Income Tax Act (CITA),” he said.
Oni also stated that the FIRS has written officially to operators who owe taxes for the period between 2010 and 2019, adding that the companies are expected to send in their responses within 30 days.
“Those who received the letters are expected to send in their responses which aren’t only about payment. The response could be an acknowledgement of receipt, a demand for clarification, payment, etc. The first step to compliance is registration with FIRS; most operators are yet to register,” Oni posited.
On her part, the Senior Advisor for Shipping Policy at the International Chamber of Shipping (ICS), Georgia Spencer-Rowland stated that the communication on the tax regime wasn’t properly carried out as most members of the ICS are oblivious of the tax framework.
Noting that the members of ICS comprise over 80% of the world’s merchant ships and 40 national ship-owners associations, she encouraged the FIRS to clearly communicate in an official document the period allotted as a grace period for the tax implementation.
“Do these taxes affect inbound or outbound ships? Are the taxes payable on freight, income or profits? Will ICS members as stakeholders be allowed to participate in the Presidential Technical Committee before implementing these taxes?” Georgia asked.
Meanwhile, Selena Challacombe, the legal counsel to INTERTANKO, said the figures and volumes quoted by FIRS for taxation aren’t the actual figures in the transactions carried out by INTERTANKO members.
Challacombe equally hinted that there could be challenges in recouping taxes with the figures for 2010 to 2019 as ship charterers are unlikely to provide the vital information seen as germane to their businesses.
Aminu Umar, the President of NCS, pointed out the need for collaboration among stakeholders and government agencies to smoothly implement the taxation.
Umar noted that the Chamber of Shipping is willing to partner with the government in its bid to collect revenue for national sustainability, but added that there must be collective input to rightly shape the shipping sector and encourage investments.