This is for Nigerian companies that evade tax each year

Features & Reports

The Federal Executive Council yesterday approved a memo to sign a multilateral convention on tax treaty to prevent base erosion and profit shifting.

Base erosion and profit shifting is a practice in which companies generate profits in a particular country and declare such in another country.

Finance Minister Kemi Adeosun told State House reporters that “One of the means by which major companies evade tax is a practice called base erosion and profit shifting, which means that the profit that was made in Nigeria using accounting methods shift it to a country that has little or no tax. Really, 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.

“What that convention would mean is that where we have existing bilateral tax treaties, like Nigeria already has some tax treaties with certain countries which actually are not in our favour. For example, we signed a treaty with a particular country that its national carrier will not pay tax in Nigeria and in exchange Nigeria’s national carrier will not pay tax there. But Nigeria does not have a national carrier. So, that type of arrangement is adverse to Nigeria.

“This convention will give us the right to go and amend that treaty and opt out of some of the treaties we’ve already signed in previous administrations that are not appropriate for Nigeria. The convention allows us to renegotiate. The benefits are: 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,” she said.