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Chevron in $10.8bn tax evasion mess

Posted by By Hector Igbikiowubo on 2005/07/27 | Views: 2571 |

Chevron in $10.8bn tax evasion mess

CHEVRON Nigeria Limited and its subsidiaries are embroiled in a $10.8 billion tax evasion scam following queries raised against them by ABZ Integrated Limited, tax consultants to the Economic and Financial Crimes Commission (EFCC).

*Tax consultants write Obasanjo, indict EFCC

*Chevron denies, says it welcomes scrutiny

LAGOS— CHEVRON Nigeria Limited and its subsidiaries are embroiled in a $10.8 billion tax evasion scam following queries raised against them by ABZ Integrated Limited, tax consultants to the Economic and Financial Crimes Commission (EFCC).

Mr. Fidelis Uzonwanne, Managing Consultant of ABZ, has already written a letter to President Olusegun Obasanjo detailing the allegations.

The consultants claim that in an investigation from December 2003 to November 2004, they studied and analysed thousands of documents and made several interim reports to the EFCC. The reports, they said, were defended to professional standards before the commission. The company said it provided the commission with incontrovertible details of how Chevron Group of companies denied Nigeria over $2.7 billion in tax and must face penalties of $8.1 billion as provided under section 50 (1) of the Petroleum Profit Tax Act of 1959, as amended.

Specifically, the tax consultants said their findings were contained in a 106-page report submitted to the EFCC on May 10 which revealed thus:

•Chevron over-bloated its cost of operations, and, therefore, evaded petroleum profit tax by $994 million;

•Based on over-bloated cost, the federation lost $1.431 billion through payment of unmerited cash call to the companies;

•In1998 and 1999, the companies diverted $75 million government tax revenue through dividends;

•Evaded tax through claims to unmerited capital allowances, based on fictitious qualifying capital expenditure by $190 million;

•Evaded tax through claims to unmerited tax credits, such as Reserve Additional Bonus (RAB) and Intangible Drilling Cost (IDC) by $222 million;

•Through conspiracy, the companies were assessed to lower amount of tax than expected by $95 million.

The tax consultants further claim that Chevron may have been involved in money laundering during the period under investigation because it did not provide details of debtors and creditors amounting to $260 million in each of the years, in its audited accounts, as required by the Companies and Allied Matters Act of 1990.

The consultants also alleged that during their defence of the initial reports submitted to the EFCC, very critical issues were raised bordering on:

•Non payment of monthly Petroleum Profit Tax installments. Chevron Oil Nigeria Limited was expected to make 104 installments for eight years to year 2002. The company failed to make 42 installments, while its partner, TOPCON, failed to pay 24 installments. This denied the nation of several millions of dollars;

•Some payments claimed to have been made by the companies were not traceable to the Federal Reserve Bank account for the domiciliation of PPT revenue;

•Use of illegal revisions of their PPT estimates to manipulate their tax liabilities. These were revisions made beyond the statutorily permitted accounting year of December 31 of each year;

•Manipulation of revenue from royalties for which DPR is responsible for determination of liabilities but ironically does not issue receipt to the oil companies for payment; instead, the office of the Accountant-General of the Federation usurped the responsibilities even though it is not a government revenue generating agency;

•Conspiracy between revenue officers and Chevron which led to replacement of Assessment Notice for a higher amount of $21,838,977 with that of $12,005,455. The difference of $9,833,492 denied the federation has been established to be a fraud actualised by duplicating an expense on licences and miscellaneous taxes in 1996;

•There were cases where FIRS credited Chevron with payments which it never made. An example was the $22,400,000 vide Treasury receipt No. PP036337 of August 14, 1997. This suggests fund diversion.

The tax consultants also said in their report that in 2002, Chevron claimed to have spent $25.5 million on community development while in actual fact only $249,000 was spent. The consultants also said in October 2004, the EFCC invited it to a meeting with representatives of Chevron and Alhaji Nuhu Ribadu, the Commission’s Chairman had threatened to shut down Chevron’s operations if he found that the group was culpable.

However, another date was fixed for the meeting when a representative of Chevron gave indication that they were unprepared for the meeting, saying: "We did not expect this elaborate meeting, we only wanted to see you privately."

The tax consultants said although Chevron had since repaid only $6.516 million in October last year, nothing has been heard from the EFCC and contrary to Alhaji Ribadu’s threat, Chevron is still operating. "We do not know if Chevron was able to see the Executive Chairman of EFCC privately as they desired, but we are sure that Chevron has not been closed down by EFCC as threatened by the chairman despite his confirmation that what ABZ said is true. Chevron Oil Companies returned $6,516 million from their loot of over $2.7 billion," the consultants said.

Reacting, however, to the allegations, Mr. Emenike Okorie, a staff of Chevron, said the EFCC carried out an exhaustive investigation last year into Petroleum Profits Tax (PPT) and royalties paid by companies under the Chevron group to the Federal Government and that no fraud was uncovered.

"Chevron is one of the frontline supporters of the Federal Government’s Extractive Industries Transparency Initiative (EITI). We welcome scrutiny and are subject to frequent audit by relevant government agencies. Our support for EITI and our internal governance practices are geared towards ensuring that issues such as tax evasion, corruption and fraud are eliminated."

The Chevron management said it remained a committed partner for the long-term economic development of Nigeria. "We meet the highest ethical standards of accountability and transparency in all our business dealings. We aim to earn the admiration of all stakeholders — investors, host governments, employees, etc. — not just for the goals we achieve but, equally important, for the way in which we achieve them."

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