Import Duty, Tax Waivers: Why Customs CG Ignored Auditor-General’s Queries

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Recently, the Auditor- General of the Federation (AuGf), accused the Nigeria Customs Service (NCS) and the Federal Inland Revenue Service (FIRS) of granting unauthorized import duty and tax waivers amounting to billions of naira, which he said should have been part of the revenue accruable to the coffers of the federal government.

In the 2019 Auditor General’s report with ref. AuGf/AR.2019/01 dated 18th August 2021 signed by Adolphus Aguhughu, the Auditor-General himself, and submitted to the Clark to the National Assembly, the Auditor-General said the waivers were granted by FIRS and the Customs Service to some selected tax payers and importers as well as under remitting revenue collected to the government during the 2019 financial year.

According to the report, the Auditor-General said he observed that “from the review of waivers granted and other relevant records, that the sum of N17,223,453.56 only, being part of import duty due to the Federation Account during the 2019 financial year was granted as waivers to fourteen (14) Staff of the Ministry of Foreign Affairs at 50% rebate” by the Nigeria Customs Service.

The auditor-general told the national assembly in his report that the Comptroller-General of the Nigeria Customs Service, Col. Hameed Ali (rtd), could not provide explanation to the waivers granted to these government officials. According to the Auditor-General, the Customs CG refused to answer 11 audit queries posed to him by the office of the Auditor-General.

The question many Nigerians would be asking is, why did the Customs Comptroller-General shun the AuGf’s audit queries? The simple reason is that Customs has no case to answer with regards to loss of revenue through waivers or the granting of waivers to importers, including the reported waivers to Federal Ministry of Foreign Affairs officials.

Informed observers and those close to customs operations know that most of the abuses of duty waivers and concessions originate from the Federal Ministry of Finance. Customs only implement policies and directives. It is not a hidden fact that individuals, especially government officials, politicians, notable traditional rulers and the likes, obtain waiver documents from the Ministry of Finance which they brandish before customs officials who have no option than to implement.

There is no doubt that the N17,223,453.56 import duty waivers granted to 14 officials of the Federal Ministry of Foreign Affairs originated from the Federal Ministry of Finance. It is not possible that Customs officials on their own would grant such 50% rebate to government officials without the directive of the Ministry of Finance.

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The huge loss to the Federation Account should therefore be blamed on the Federal Ministry of Finance and powerful government officials who make policies only to circumvent them. The Auditor-General’s queries ought to have been directed to the Minister of Finance who would now demand explanation from Customs if she is unaware of what is going on in her ministry. The Customs would then explain to her how the waiver to the government officials came about.

Strictly speaking, the Customs CG shunned the waivers audit queries because he has no explanation to make, and expects demand for explanation to go the FMF where the problem is. With regards to granting of waivers, everything emanates from the supervising ministry: Customs only implement policies and directives. And by the way the system is structured, any waiver to any importer or government official must be backed by appropriate documents from the Ministry of Finance.

It is on record that past customs administrations had decried the huge revenue losses due to waivers. They had often complained that duty concessions and waivers were taking a toll on their revenue collection efforts, and had always affected their annual collectible revenue figure.

It is not known if the Ministry of Finance officials have stopped issuing waivers to individuals or stopped interfering with waiver administration by the Customs. This is what the Customs CGshould let the Office of the Auditor-General know if they insist on putting the blame on Customs.

In the same report, the auditor-general accused the Customs and FIRS of under remitting revenue they collected to the government during the 2019 financial year. This accusation also exposes the ignorance of the auditor-general’s office and the national assembly which often accuse customs of not remitting appropriate revenue collected to government coffers.

As a matter of fact, customs do not collect revenue like FIRS or other government agencies. Customs duty is not paid to customs but to banks. Importers and their agents only submit their import documents to Customs which assess the documents and issues them with PAAR (Pre-Arrival Assessment Report) which tells them how much to pay as duties and taxes. The importers/agents pay directly to the designated commercial banks which in turn remit to the Central Bank.

With this arrangement, customs do not collect or handle revenue and therefore have nothing to remit. Accusing the organization of under remission of revenue is, therefore, outlandish and a display of ignorance of customs operations.

The whole revenue collected goes to the Central Bank through the commercial banks. From the money collected, 7% which is called cost of collection, is then remitted to Customs for running costs and payment of salaries.

For the sake of clarity, Customs only executes government fiscal policies and directives, and do not collect revenue. And since they do not collect revenues, they have nothing to remit.

From the foregoing, the Customs CG was right in shunning the audit queries, because they ought to be directed to the Federal Ministry of Finance and the Central Bank of Nigeria.

The case of the FIRS is another kettle of fish. Officials of the revenue service are known to collaborate with big companies and even foreign companies to evade tax payment. According to the Auditor-General’s report, records from the FederationAccount Allocation Committee revealed that some companies were granted tax waivers and penalties by the Federal Inland Revenue Service (FIRS) in contravention of existing government circulars.

It said that despite directives, the FIRS was only able to recover the sum of N47.517bilion, leaving the balance of N23.703 billion unrecovered since the 23rd of January 2019. And that the Executive Chairman of the FIRS failed to answer all the audit queries posed to the revenue service. The management only responded to two of the six audit queries issued to the agency by the Office of the Auditor General of the Federation.

FIRS management could not give reasons why the sum of N23.703 billion was still outstanding, or provide the list of companies that failed to pay the amount due against them.

The report further said that “the anomalies could be attributed to weaknesses in the internal control system at the Federal Inland Revenue Service” as it could lead to loss of revenue to the Federation Account as well as difficulty in funding the annual budget. And this is agency the Federal Ministry of Finance is proposing to take over the duty collection function of Customs. Unlike Customs, the FIRS collects revenue and remits to government account. It ought, therefore, to answer queries pertaining to waivers and tax concessions as well as under remission of revenue.

Notably, all these infractions have been going on over the years. It is only when the auditor-general or the National Assembly, embarks on a probe that Nigerians get to hear about these economic breaches and sabotage. Unfortunately, after the exposure and all the noisy probes, the issue is forgotten and the money is never recovered.

The Auditor-General’s report only talks of the losses in 2019. What about 2020, 2021 and the previous years? If the amounts lost to waivers are compiled for ten years, the loss would be so staggering, and will provide an insight into why Nigeria will continue to borrow to finance her capital projects.

As the Auditor-General has directed, the full amount lost to these unauthorized duty and tax waivers must be recovered and accounted for or appropriate sanctions imposed on the government agencies. Nigeria cannot be losing revenue unnecessarily to privileged individuals in the society while stifling ordinary Nigerians with taxes and price increases. The country should not also be misusing its abundant resources while depending on borrowings to finance infrastructure provisions

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