FG ratifies treaties to curb tax evasion by multinational firms

The Federal Executive Council (FEC) meeting presided over by Acting President, Yemi Osinbajo, has approved the signing of a multilateral convention on tax related treaties that will end profit shifting and tax evasion by multinationals. This approval was part of the government’s plan to push up its tax base and improve revenue generation.

Government had in 2016 said it lost about $1 trillion to tax evasion and avoidance by multinationals, stressing that to address the problem, it would need to compel multinationals operating in Nigeria to  provide reports on their operations in other countries.
The country also said it lost about $178 billion to illicit financial flows in the last 10 years.

The Minister of Finance, Kemi Adeosun, who briefed alongside her colleagues in Information, Lai Mohammed, Transport, Rotimi Amaechi, and  Power,  Works and Housing, Babatunde Fashola, said this was part of government’s plan to push up its tax base and improve revenue generation.
She explained that the convention will enable Nigeria evaluate, amend and cancel existing treaties that are not beneficial to it, adding that the signing will also curtail illicit financial flows.

Adeosun said, “this convention will give us the right to go and amend that treaty and opt out of some of the treaties we have already signed in previous administrations, that are not appropriate for Nigeria.  The convention allows us to renegotiate.

“The benefits are that the convention will swiftly modify existing bilateral tax treaties to implement tax treaty related matters in a cost-efficient manner instead of individual negotiation 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 it will increase the tax revenue of the government.”

Adeosun explained that the administration is focused on revenue generation and mobilisation and part of that work is to improve its tax collection.
“One of the means by which major companies evade tax is a practice called base erosion and profit shifting, which means that the profit made in Nigeria using accounting methods shifts to a country that has little or no tax.

“So, 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 G20 countries and the OECD to end this and Nigeria was part of those who negotiated this convention and today, council gave us permission to go and sign the conventions,” she said.

Adeosun added that, “some of the existing tax treaties with a particular country may say that their national carrier will not pay tax in Nigeria and in exchange, Nigeria’s national carrier will not pay tax in their country but as you know, Nigeria does not have a national carrier, so that type of arrangement is adverse for Nigeria.”