The Federal Inland Revenue Service has expressed concern over the loss of revenue in the country through illicit financial flows, particularly those disguised as legitimate commercial transactions.
The Coordinating Director of the Proceeds of Crime Management and Illicit Financial Flows Coordination Directorate of the FIRS, Prof Bolaji Owasanoye, raised the concern in an interview with Sunday PUNCH.
Owasanoye, who is the immediate past chairman of the Independent Corrupt Practices and Other Related Offences Commission, said in its bid to boost revenue generation, the FIRS would organise a national conference on illicit financial flows.
He noted that the FIRS was taking steps to curb such losses, stressing that tax revenue remains the most dependable source of funding for national development.
According to him, the fight against illicit financial flows is critical to the FIRS’s ability to fulfil its mandate of collecting revenue for the government.
Owasanoye said, “Illicit financial flows significantly affect tax revenue, and if people don’t understand how it affects tax revenue, they will not appreciate the effect on the ability of the tax authority to meet statutory mandate, which is to collect revenue for government.
“Basically, there are three sources through which a country loses money that it ought to have for its development aspiration. One is by commercial transactions, another is by corruption, and the third is by criminal transactions. People focus more only on corruption and criminal transactions, which jointly account for slightly above 30 per cent of the losses. Commercial transactions account for over 60 per cent of revenue losses.
According to him, the fight against illicit financial flows is critical to the FIRS’s ability to fulfil its mandate of collecting revenue for the government.
Owasanoye said, “Illicit financial flows significantly affect tax revenue, and if people don’t understand how it affects tax revenue, they will not appreciate the effect on the ability of the tax authority to meet statutory mandate, which is to collect revenue for government.
“Basically, there are three sources through which a country loses money that it ought to have for its development aspiration. One is by commercial transactions, another is by corruption, and the third is by criminal transactions. People focus more only on corruption and criminal transactions, which jointly account for slightly above 30 per cent of the losses. Commercial transactions account for over 60 per cent of revenue losses.
“Within that framework of commercial transactions, the biggest losses are to tax revenue. But people don’t know. And this is based on the operations of corporations which have commercial transactions that appear legitimate on their face value. But in actual fact, they are being used to move money and reduce taxable profit.”
He explained that many multinational corporations engage in practices that, though seemingly legal, are structured to shift profits and reduce tax liabilities in Nigeria
.The strategies, he added, often involved complex cross-border transactions designed to move money out of the country, thereby shrinking the taxable base.
“What the tax authority looks out for apart from specifics like Value Added Tax (VAT), stamp duties and PAYE and all that is to tax profits of corporations and businesses. If you succeed in significantly reducing your profit because of these anomalous practices, you have reduced the collectable of the tax authority.
“So, the conference is designed to bring attention to these issues, how they happen, the various agencies that must work together and collaborate to make sure that we reduce very significantly, in our own interest, revenue losses to illicit financial flows,” he said.
Owasanoye said the conference aimed to enlighten Nigerians on the menace that illicit financial flows pose to economic development and efforts that must be made to address it.
He called for stronger collaboration among government agencies to effectively combat illicit financial flows, saying “There are various agencies that must work together to significantly reduce revenue losses to illicit financial flows. This is in our collective national interest.”
FIRS vowed to strengthen oversight, enhance transparency, and work closely with other stakeholders to close loopholes and hold defaulting entities accountable.
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