Nigeria Loses N90bn to Tax Evasion in Automobile Industry

MD/CEO, Financial Derivatives Company Limited, Mr. Bismarck Rewane

Despite claims of surpassing revenue target by the Customs Service, Nigeria is said to have lost N90 billion ($550million) in revenue from tax evasion to the grey market operators in the automobile industry over the last four years.

The Managing Director/Chief Executive Officer, Financial Derivatives Company Limited (FDC), Mr. Bismarck Rewane, disclosed this in a report made available to THISDAY.

Describing the loss as mind-boggling, Rewane, a renowned financial analyst, said the loss was equivalent to 4.5 per cent of the total exports of Kenya or four per cent of the total exports of Ghana.

“This amount could fund the construction of one petroleum refinery or a modern power station with 1000 Mega Watts capacity,” he said.
He explained the grey market as situation in which goods are imported inappropriately into a market without the manufacturer’s consent, thereby short-changing the authorised dealers.

The authorities of the Nigeria Customs Service had said it had surpassed the projected revenue over the same period due to some stringent measures put in place to check leakages of revenue.

The Comptroller-General, Abdulahi Inde Dikko, had attributed the feat to the stringent measures he put in place to closely-monitor revenue performance and block leakages.

However, Rewane said the revenue loss was too staggering when viewed on a leveraged basis of one to three (1:3), saying the amount could finance the rehabilitation of two seaports and two modern airports, with an income per capita of $1500 and infrastructure gap of $200 billion.

The FDC boss rued over the monumental loss of government revenue arising from the grey market which he said affected government revenue from both direct and indirect taxes.

According to him, while direct tax loss came from the reduced sales and profit in the legitimate automobile industry, indirect tax loss came from the custom duties and excises.

“The bulk of the loss comes from the indirect taxes based on FDC’s survey. Recent data from the CBN shows that a fall in customs and excise duties was one of the reasons the Federal Government non-oil receipts declined by 30.3 per cent to N589.98 billion in the last quarter of 2012.

“From our investigations, the continuous decline in government customs receipts can be due to either a reduction in national import or to increased importation through the grey market leading to avoidance of duty payment by grey market operators and corruption at the ports.

“Data collected from the Nigeria Port Authority (NPA), Manufacturers Association of Nigeria (MAN) and through independent survey of the automobile industry shows that grey import is striving and almost at par with official import volumes. Loss to government from grey import is N85.2bn between 2008 and 2011,” he added.

Rewane said in some cases, automobiles that were destined for land-locked nations such as Burkina Faso, Niger, Chad and trans-shipped through the ports find their way to the Nigerian market and custom duty payment is avoided in the process.