Whistle-blowing and Taxation in Nigeria; A Case for Proper Legislation.
Nigeria can hardly be said to be a tax paying country; with what, its compliance rate of 6 percent and its ranking as one of the most tax evasive countries in the world. About 10-15 years back, Nigeria could probably afford to overlook non-payment of taxes, however with the new economic realities ushering in facts appearing to be more harsh than what has ever been known in its socio-economic and political history, Nigeria can no longer afford the luxury of watching tax evaders perpetrate various financial doctoring to avoid payment of unpaid taxes that have accumulated and are ever-negatively affecting the revenue of the country.
To the effect of curbing tax evasion, the Minister of Finance, Mrs. Adeosun Kemi made overt, the readiness of various governmental institutes to go after wealthy Nigerians who evade tax payment . However, it behooves to say, arrangements need be made to ensure the diligent workings of the various structures of curbing evasion. It must be noted that in tax fraud, particularly as regards forgery, the FIRS has taken a laudable step by introducing the electronic tax clearance certificate billed to take full operation in the next three weeks. This system sends the certificate to taxpayer’s emails with options to print such documents evidencing tax remittance and payment. This and other methods particularly whistleblowing which is the crux of this paper, all need proper legislations covering their establishments, dispute resolution and complaint mechanisms inter alia.
Whistleblowing in Nigeria
Ralph Nader coining the term whistleblowing puts it forward as an act of reporting a violation or a misconduct to the appropriate authorities. These could range from sexual assaults to theft and financial misappropriations. In Nigeria, the whistleblowing policy gained prominence with the usher in of the Buhari regime with agenda predominantly aimed at exposing various scams and corruptions.
It has now been extended from financial issues to matters of security as evidenced by the move made by the presidential committee on small arms and light weapons to expose diversion of funds meant for weapon-acquisition and other issues ancillary thereto.
Whistleblowing and Taxation
In July 2012, the FIRS sued Jimoh Ibrahim, former gubernatorial candidate and business man and his company, Air Nigeria for forgery and tax clearance certificate whilst also evading tax payment of VAT and withholding tax to the tune of 4.86 billion naira contrary to Sec.40 of the FIRS Act. Failure to file annual returns contrary to Sec. 55(1) of the CITA . This was made possible by the whistleblowing done by an employee who was also a victim of jimoh Ibrahim tax fraud as taxes withheld from his salary and that of other employees were not remitted to the relevant tax authorities thereby denying those persons benefits accruing to them using their TCC. Air Nigeria till date owes about N1.8 billion in taxes. This whistleblower also made various allegations concerning unpaid personal income taxes of Jimoh Ibrahim to the tune of millions of naira.
This and other tax frauds that remain earthed; for instance, in 2006, the House of Representatives Committee on Petroleum Resources reported that Chevron group evaded about N140 billion in taxes. Also, over $20 billion was reported lost as a result of tax frauds implicating the ministry of finance under Dr. Ngozi Okonjo Iweala, Ministry of Agriculture and Ministry of Solid Minerals Development amongst others.
The trend of exposing frauds by whistleblowing should be lent to taxation properly and a legislation backing same should be enacted to give weight to the policy. This would aid compliance on the part of tax payers and also discourage money laundering, financial scams and particularly, tax evasion whilst boosting and increasing the revenue of Nigeria on a large scale. The tax whistleblowing policy should be made to cover incidences of delaying the marking of losses and earnings to shift them to a different tax assessment period, false deductions, exaggeration of losses, dubious tax shelter designs, altering parent company-subsidiary company financial relationship, concealing earnings made in Nigeria and other means of tax frauds.
The efficacy of this policy should not be in doubt as it has been proven to be a reliable means of exposing crimes as evidenced by the signed statement of the Ministry of Information whose reports stated that the whistleblowing policy in Nigeria has yielded about $151 million and N8 billion naira in looted funds. In addition to the recent Ikoyi loot of $46 million, $9.2 million found with former GMD of NNPC, a total of over $160 billion have been recovered by whistleblowing policy.
A model law is the Tax Fraud Whistleblower Law, 2006 inspired by the Philip & Cohen LLP case in the USA which is aimed at getting numerous people to expose tax frauds. In 2006, the tax court held that, IRS whistle blowers could get awards where taxpayer even pays criminal, civil damages apart from recovery of taxes. The system has been commended for its responsibility as to the recovery of over $340 million in 2001-2005 in unpaid taxes. Bernstein Liebhard LLP, a firm in New York has also noted that whistleblowing is a potentially relevant tool in stopping tax fraud and other violations of our tax laws.
The need for legislation
The whistleblowing policyin Nigeria, presently operates to protect whistleblowers with such entitled to 2.5 – 5.0 % of the recovered loot with the proviso that the money is recovered voluntarily and on the information of that whistleblower. While the Federal Ministry of Finance and the EFCC both act as blanket institutions on matters of whistleblowing, there seems to be no established legislation or institution administering this policy and also lending quality protection to whistleblowers.
In advanced climes, legislations exist covering whistleblowing as an institution. For instance, the Sarbanes –Oxley Act and the United States federal sentencing guidelines for organizations. The Supreme Court ruled that public whistleblowers are protected under the first amendment rights from job retaliation. In 2010, the importance of a legislation covering whistleblowing was reaffirmed at the G20 Anti-corruption working group. Established laws protecting whistleblowers include ;
• Canada- Office of the Public Sector Integrity Commissioner of Canada
• Switzerland- Swiss Code of Obligations (Sec 321, 328 and 336(2))
• United Kingdom- Public Interest Disclosure Act of 1998
• Australia – Public Interest Disclosure Act of 2013
Internationally, the 1998 on Recommendation on improving ethical conduct in the public service and the2003 OECD Recommendation on guidelines for managing conflict of interest in the public service
Key points for an effective legislation
• Quick filling of reported incidents of violations
• Adequate provisos of protection given to whistleblowers
• Prompt payment of awards tow whistleblowers
• Unfair workplace treatment of whistleblowers should be prevented
• Provision of an appeal rights to whistleblowers
• Creating an institution administering whistleblowing activities
Today magazine April 18th 2017
Sahara Reporters 2014
Business Times Media 2017
Whistleblowing protection organization
Bernlieb.com “The History of Tax Whistleblowing”
Vandekerhove, Wim (2006) “Whistleblowing and Organizational Social responsibility: A global assessment”
Whistleblower protection and encouraging reporting OECD 2012
Moshood Ibrahim Olawuyi