According to him, illicit financial flows and tax evasion have assumed a different dimension, with some companies claiming they pay expatriates who purportedly work for them online to move money illicitly from Nigeria to countries abroad.

A former Chairman of the Independent Corrupt Practices and Other Related Offences Commission (ICPC), Prof Bolaji Owasanoye (SAN), has disclosed that some companies in Nigeria inflate operating expenses and credit repayments to evade tax.

Owasanoye stated this on the Friday edition of Inside Sources with Laolu Akande, a socio-political programme aired on Channels Television.

According to him, illicit financial flows and tax evasion have assumed a different dimension, with some companies claiming they pay expatriates who purportedly work for them online to move money illicitly from Nigeria to countries abroad.

The senior advocate said some companies operating in Nigeria have sister companies overseas but engage in transfer pricing to move money to those companies by inflating the cost of the goods they pay the firms.

Owasanoye said about 65% of capital outflows in Africa are illicit financial outflows.

?About $50bn to $80bn annually. Of that, Nigeria, because of the size of its economy, accounts for a substantial part of it,? he said.

?65% of that is around commercial transactions which on the surface look normal. This is by multinationals doing business, and the channel through which they do this mostly is through transfer pricing.

?Transfer pricing is when corporate entities trade among themselves ? the same company owned by the same set of people but they pretend as if they do not know themselves.

?Company A in Nigeria wants to buy microphones from Company B in the UK. The microphones cost $10, but to take money out of Nigeria, which has a big economy, they inflate the price to $100.

?It happens in any industry, but mostly in the extractive industry ? oil and gas, gold, solid minerals. It happens in trade and consumer, it happens in telecommunications, it could happen in banking, it could happen in technology, it could happen in consultancy services.

?For example, a company wants to do technological integration. There are IT (information technology) experts in Nigeria. It then enters an agreement with some IT experts from Country X outside Nigeria, and they come from one meeting. The Nigerian experts do all the work. They initiate a bill of $10m and purport to pay the chaps out there $10m who did not do the work. You have just moved capital.?

Owasanoye also said some companies in Nigeria claim erroneously that they are repaying loans to certain foreign entities to evade taxes. He said those companies would consistently remit huge money to foreign entities under the guise of loan repayment but in truth are engaged in illicit financial flow.

He said, ?Most African countries are promoting foreign direct investment but some investments come with a baggage. If some of the investments come with practices like this, you will lose more than you gain: they falsify records, trade transactions, and all that.

?They declare low profits because they?ve increased operating expenses. So, they?ve prevented the tax authorities from taxing higher profits because they?ve increased operating expenses illegally and fraudulently by documentation.

?Or somebody says: ?I need 200 expatriates? and gets expatriate quota for 200 and says: ?I am paying them.? In this digital world, they are not in Nigeria; maybe only 10 of them have come to Nigeria, but they are paying salaries to these people.

?It is not only foreign companies who are implicated; even Nigerian companies when they do exports. If you export 200 units of a phone, it is expected that when you earn revenue abroad, you will bring the money back home, but you falsify the paper; you exported 1,000 but you wrote 200 ? you leave the payment for 800 offshore, and deny the government of revenue. It is illicit financial flow.?

The former ICPC boss said he has been working with the Federal Inland Revenue Service (FIRS) to train their staff members and increase awareness of the tactics used by companies to evade taxes.

He also said one of the ways to deal with illicit financial flows is to work with agencies like Customs and through the government?s single-window payment platforms. (Channels TV)

Update news