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General Electric, Arco’s Tax Controversy Continues To Generate Ripples

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The controversial tax remittance disputes between General Electric and Arco Group Plc have continued to generate ripples, even as the company awaits final resolution.
Documents made available to our source show that GE, a multinational company operating in Nigeria, had engaged Arco, an indigenous Nigerian oil servicing company, for the supply of local personnel.
But Arco in one of its letters dated June 5, 2018, claimed that GE deducted 10 per cent as withholding tax for the contract between 2006 and 2015, against the five per cent stipulated by Nigerian law.
The company said the applicable tax rate should be five per cent in line with the FIRS Circular No. 2006/02, dated February 2006.
The firm however alleged that GE insisted that the rate is 10 per cent in line with the contract for technical services.
In June 2017, Arco wrote GE demanding compliance based on the position of the Lagos State director of FIRS, with claims that the tax filings of both companies fall within Lagos jurisdiction and that the office is competent to give official interpretation of any circular issued by the FIRS.
But in its response, GE directed the firm to write to the Abuja office of the FIRS.
According to Fasilat Ransome-Kuti, who replied on behalf of GE, only such clarification could give the firm comfort’.
“We will not take action on any letter from any other tax office,” she added.
On July 11, 2017, Arco wrote the FIRS seeking clarification on the controversial remittance.
“Our interpretation of the contract of supply is that the applicable WHT rate should be 5% in line with the Federal Inland Revenue Service Circular No. 2006/02 dated February, 2006,” said the firm in the letter signed by Nejoh John.
“However, section 3.5 of the circular (Lines 8-11) referred to what should be classified as technical services states: “…the use of industrial machinery/equipment to provide a service does not render it to be technical because industry position requires that only arrangements that involve a transfer of technology, should be classified as technical,” wrote Arco in a letter seeking clarification from the Federal Inland Revenue Service, FIRS.
The firm also argued that other IOCs it worked for in the past applied WHT rate of five per cent on services rendered to them by Arco.
The FIRS in its response dated November 2, 2017, said the only part of the contract where 10 per cent tax applies is office rent which is to be deducted by Arco and remitted to the FIRS.
GE in its response letter dated January 18, 2018, seen by PREMIUM TIMES, said it would engage its consultant, Price Waterhouse Coopers (PwC), to confirm the technical basis of the conclusion and advise it as appropriate.
Arco in its response, said there was no basis for GE’s attempt to clarify FIRS’ clarification and thus demanded immediate payment of its outstanding invoices underpayments.
“What we are requesting now, is the refund of 50% of total WHT deducted from Arco’s invoices from the period 2006 to 2015 as earlier communicated to you in our letter dated November 6, 2017, following the FIRS’ clarification as follows,” wrote Ben Omotomiye, Group Head Finance and Admin, Arco.
“1. €56,577.61 (Fifty-six thousand, five hundred and seventy-seven euros, sixty-one cents).
“2. $2,923,642.36 (Two million, nine hundred and twenty-three thousand, six hundred and forty-two dollars and thirty-six cents).
“3. N360,482,041.19 (Three hundred and sixty million, four hundred and eighty-two thousand, forty-one naira and nineteen kobo).”
Beginning from the second week of July, several weeks-long efforts by PREMIUM TIMES to get GE’s side of the story proved abortive.
In the last week of July, a spokesperson of the company, Obagbemi Olusegun of BHGE Communications Sub-Saharan Africa, promised to reply our reporter’s email but failed to do so after numerous reminders.
PREMIUM TIMES’ reporter later visited the head office of GE in Victoria Island but was prevented from speaking with officials of the IOC.
Similarly, the FIRS declined to speak on the case as several emails sent to the agency were not replied.
The Guardian later reported that the tax authority has said it will refund the N360 million and $2 million excess withholding tax (WHT) deducted from Arco through its business dealings with General Electric (GE).
The paper said the details were contained in a letter it obtained, dated July 26, 2018, and directed to PricewaterhouseCoopers (PwC) Limited, (tax advisers to GE) with reference number FIRS/TPAD/GEN/272/V.IX/.
“In respect of the treatment of excess WHT deducted from Arco and remitted to FIRS, Arco has either of the following two options: To formally apply to FIRS for the refund of the excess WHT deducted so long as there is evidence of remittance to the FIRS account; or to use same to offset its future tax liabilities,” the FIRS letter reportedly read.

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Oil & Energy

Nigeria In Trouble As Oil Price Crashes Below $20

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Oil price fell below $20 a barrel yesterday, after the International Energy Agency (IEA) said demand would slump by a record this year despite a historic production cut deal.
Futures fell as much as 4.5% in New York to the lowest since 2002.
Oil demand will drop by over 9 million barrels a day this year, wiping out a decade of consumption growth, the IEA said, exhausting storage by mid-year.
While Saudi Arabia and other Gulf producers have pledged to cut supply starting next month, they have continued to flood the market in April.
Stockpiles are rising everywhere and weakening key physical market gauges. New York oil futures moved deeper into contango, signaling an expanding glut, while swap prices indicate North Sea cargoes are trading at bumper discounts.
Oil has lost about two-thirds of its value this year as countries extend their coronavirus lockdowns, death tolls mount around the world and unemployment explodes in America.
The International Monetary Fund (IMF) estimated the global economy will shrink 3% this year, a signal that energy demand may remain weak, while the IEA is warning that the worst may be yet to come.
“We may see further downward pressure on prices in coming days and weeks,” IEA Executive Director, Fatih Birol, said.
The IEA said consumption in April will fall by almost a third to the lowest level since 1995, and make this year the worst in the history of the oil market.
Despite OPEC+’s efforts to balance supply, global inventories will accumulate by 12 million barrels a day in the first half of the year and “overwhelm the logistics of the oil industry” in the coming weeks, it warned.
The massive OPEC+ deal to cut production starts next month. Until then the battle for market share persists with Abu Dhabi cutting its crude pricing for Asia. It follows a similar move by Saudi Arabia earlier in the week.

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NUPENG Lauds Members Over Petrol Supply Amid Lockdown

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The National Union of Petroleum and Natural Gas Workers (NUPENG), has commended its members on essential services for ensuring uninterrupted supply of petroleum products to every nooks and crannies of the country during the lockdown occasioned by the Coronavirus pandemic.
The union, however, decried the harassment and intimidation of oil company workers by security agents, calling on oil companies and the Department of Petroleum Resources (DPR) to provide adequate security passes for the workers.
NUPENG in a statement by its President and General Secretary, Prince Williams Akporeha and Olawale Afolabi, respectively, said petroleum tanker drivers, petrol station workers, petroleum products depot workers, oil and gas suppliers, and  liquefied petroleum gas retailers, had  made NUPENG and the  entire labour movement proud  as they moved through difficult and dangerous situations to ensure fuel supply to Nigerians.
The statement read in part: “The leadership of NUPENG has reviewed the roles of our members in the frontline in this critical period as Nigerians fight to contain the spread of the deadly and contagious coronavirus pandemic and we are proud to say our members on essential services have made us proud.
“In fact, not only have they made NUPENG and the United Labour Congress of Nigeria proud, our petroleum tanker drivers and others have made the entire labour movement proud by continuing to ensure uninterrupted supply of petroleum products to every nooks and crannies of the country despite the difficult and sometimes, dangerous situations as most states across the country are on lockdown.
“Once again, we appeal to state governments, security agents and Nigerians in general to cooperate with members of our unions who are risking their lives to provide essential services in the nation.”
NUPENG also appealed to corporate organisations to provide sanitisers and other safety kits to members of the union on essential services, to protect them and members of their families.
It stated: “We want to use the opportunity to call on oil companies and the DPR to provide adequate pass to our members on essential services to end the harassment and intimidation they are being subjected to by security agents across the country.”

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Oil & Energy

FG Releases N200bn To Improve Power Sector 

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Group Managing Director of Nigerian National Petroleum Cooperation (NNPC), Mr Mele Kyari, says the Federal Government has made payment of over N200 billion to the power sector towards improving electricity supply in the country.
Kyari disclosed this while speaking with newsmen in Abuja, yesterday, shortly after a closed door meeting between the NNPC team, Minister of Power, Mr Sale Mamman and Managing Director of Transmission Company of Nigeria (TCN), Mr Usman Mohammed.
“Actually the Federal Government has made payment of over N200 billion for power in the last 23 days and this will go a long way to ensure that issues around power supply are addressed.
“We will work as a team to ensure that all issues are settled”, he said.
Kyari said that the team was in the Ministry of Power to inform the minister that in the last one or two months and particularly during the COVID-19 period, NNPC has increased gas supply to the power sector.
According to him, there will be significant improvement in power generation in all Federal Government and associated power facilities.
“This also means that Nigerians will get better access to power during this lockdown period and going forward.
“There are issues around power supply process and we have discussed most of them and we are moving as a team to make sure that we resolve issues around payment and evacuation.
“We are very confident that this will get the desired result. We will visit some power plants tomorrow to make sure that we sort out any issue to ensure that Nigerians have access to better power,” he said.
He said that the minister was very clear on what was to be done to improve power supply.
“We will make sure this becomes transparent and obvious to all Nigerians,” he said.
On his part, TCN Managing Director, Mr Usman Mohammed said that the meeting was to ensure that there was constant supply of power as directed by President Muhammadu Buhari.
Mohammed said that the President has directed that there should be constant power supply to the people during the COVID-19 lockdown.
“This is why this meeting was conveyed by the Minister of Power to discuss supply of gas to the power plants.
“This is very important, before now, we have been discussing with NNPC, of course there is gas availability in the market but there are several power plants that don’t have gas and that is a big problem for us.
“With this meeting where the minister prevailed that NNPC should assist in suppling gas to the power plants, we believe that will have steady and sustainable power supply going forward especially during the COVID-19 lockdown, “ he said.

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