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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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PH Refinery Trains 80 Youths In Rivers

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The Port Harcourt Refining Company Limited (PHRC)-Eleme has graduated 80 participants of its youth empowerment and skills acquisition programme, charging them to be economically preoccupied with their acquired skills.
The Managing Director, PHRC, Mr Abba Buka gave the charge at the 3rd Graduation Ceremony of Youth Empowerment and Skills acquisition Programme (YESAP) in Eleme, Rivers, recently.
The beneficiaries were trained in welding and fabrication, information and communication technology, agriculture vocation, catering, hair dressing, fashion and design and interlock/block moulding.
Starter packs which ranged from sewing machines, power generating sets, hair dryers and washers, welding inverters, gas cookers, to cooking pots were presented to them according to the skills they acquired.
Buka, who presented the beneficiaries with Certificates of Completion and starter packs, urged them not to sell the packs but to use them judiciously to be empowered economically.
According to him, skills acquisition and youth empowerment are no doubt a proven route to economic prosperity for any community.
‘’It affords the youth an opportunity to explore inner creative talents in them, build confidence and explore channels for useful economic involvement.
He said that it was due to the advantages that the company, in commitment to its corporate social responsibility and sustenance of its community relations, invested in the YESAP for the youth of its host communities (Eleme and Okrika).
‘’It is my hope and belief that the youth empowerment and skills acquisition programme will divert the attention of the youth from crimes and criminality as they would be economically preoccupied.
‘’And therefore reduce cases of strife and apprehension in the communities and youth restiveness,’’ the MD said.
Buka charged the host communities to continue on the part of peace and negotiation using the Joint Community Relations Committee (JCRC) platform to resolve any differences that might arise.
He assured the communities that they would be carried along in the different phases of the company’s planned rehabilitation, adding that the company was committed to maintaining the cordial relationship with the communities.
Also speaking Executive Director Services, PHRC, Mr Babatunde Sofowora said that the graduation of the 3rd edition of YESAP was a testament to the commitment of the company and NNPC to foster mutual and symbiotic relationship with the host communities.
The company had earlier trained 155 youths in various areas of trade in its first and second editions and the recent edition has brought the number of beneficiaries to 235.
Mr Obari Moses, who spoke on behalf of the beneficiaries, thanked the company for its gesture stating, ‘’we are well-trained. Acquisition of talent cannot be quantified.
‘’We are aware of the challenges in business but with the knowledge we have been given, we shall surmount the challenges.’’
Another beneficiary, Grace Obari who acquired skills in fashion and design said that she had achieved something she never achieved in her life adding, “now I can sew by myself.
“I’m very happy about the scheme; may the Lord bless the PHRC abundantly for giving me skill to better my life and contribute my own quota to the economy.”

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‘Nigeria Imports 5.61bn Litres Of Fuel In Q2, 2019’

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The National Bureau of Statistics (NBS), has announced that 5.61 billion litres of Premium Motor Spirit (PMS), popularly known as petrol were imported into the country in the second quarter of the year.
The NBS said this in its Petroleum Products Imports and Consumption (Truck Out) Statistics for Second Quarter, 2019, obtained from its website.
It also reported that 1.38 billion litres of Automotive Gas Oil (AGO) also known as diesel, 12.22 million litres of kerosene and 131.36 million litres of aviation fuel were imported.
The report also indicated that 77.24 million litres of base oil, 41.79 million litres of bitumen and 27.68 million litres of Low Pour Fuel Oil were imported in the period under review.
According to the report, 354.70 million litres of Liquefied Petroleum Gas (LPG) was also imported into the country in the second quarter of the year.
The NBS said that state-wide distribution or truck-out volume for the second quarter showed that 5.18 billion litres of petrol were distributed nationwide.
It said that 1.28 billion litres of diesel, 131.42 million litres of household kerosene, 176.14 million litres of aviation fuel and 157.29 million litres of domestic gas were distributed nationwide during the period.
The data for the report was provided by the Petroleum Products Pricing and Regulatory Agency, verified and validated by the NBS.

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Oil & Energy

HYPREP Admits Receipt Of $180m For Ogoni Clean-Up …Denies Allegations Of Missing Funds

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The Hydrocarbon Pollution Remediation Project (HYPREP) has denied allegations that some funds it received for the on going Ogoni clean-up exercise were missing, saying the body has so far received $180million.
The Project Coordinator of HYPREP, Dr. Marvin Dekil, disclosed this in Port Harcourt, the Rivers State capital, during a live radio programme monitored by The Tide, recently.
It would be recalled that HPREP was set up by the Federal Government to implement the recommendations of the United Nations Environment Programme (UNEP) report on the pollution in Ogoni land, Rivers State.
Dekil, who was reacting to allegations in some quarters that the clean-up funds may have been diverted due to the prolonged delay in implementing the UNEP report, explained that the initial cost of the clean-up was $1billion, but that the cost could be more.
“Let us start by asking how much is the process going to cost? The process is going to cost an initial $1billion. That is what we need to start with to my understanding. It is going to cost more, I believe.
“How much have we received? We received an initial $10million, and recently, another $170million. So, we have received $180million.
“That is what the Board of Trustees of HYPREP has received. Each time I talk about this money, I am very particular, and I have to let people understand the governing structure of HYPREP, and the different roles played by these structures.
“It is the Board of Trustees (BoT) that is in charge of receiving this money. They function separately from the project coordination office. Remediation is an international activity. If you cost it in local ways, you may not appreciate what we are doing.
“The way it works is that the BoT collects the money, and they are holding it. They are managing it. It has nothing to do with project coordination office. There is the Governing Council that approves all our activities. They are the approving and policy making part of the project, separate from the BoT, and separate from the project coordination office,” he stated.
The HYPREP project coordinator further said that “Just this month (August), my team and the United Nations team and the oil companies just finished with the budget this year, and we are looking at the activities between now and December. That will cost, I think, about $80million. These are the things that we are going to do.
“That we have the money, even if the entire $1billion was given to us now, it doesn’t mean that we are going to spend all of it just like that. You need to come up with detailed programmes and have the buy-in of all the stakeholders to what it is you want to do with the money before you spend it.
“This is how difficult it is to spend the money. So, when they are talking about ‘you have received $180million, what have you done with it? The money is there. We are taking it as we need and as all the parties agreed that it will be spent. When I talk about the parties, I am talking about the three governing structures.
“I am also talking about the stakeholders, being the oil companies, the United Nations system, the Nigerian government. We are driving this process and the Ogoni people who are also part of this administration and the policy making of this will all have to agree on how to spend the money and what to do with it within the context of the recommendations of the United Nations.
“This is what we have been doing. And you see frequently we are going back to Geneva because that is where the technical capacity, the leadership of UNEP is. So, we don’t take one step without synchronizing the input of all who are on this. So, not a dime of our money will be spent without the input of others, and so, no money is missing,” Dekil stated.

 

Dennis Naku

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