Nigeria News

Nigeria loses N90bn to duty evasion in automobile industry

Managing Director of Financial Derivatives Company Limited (FDC), Mr. Bismark  RewaneThe Federal Government has lost a whopping N90 billion (about $550 million) in revenue from tax evasion to the grey market operators in the automobile industry over the last four years.

Managing Director of Financial Derivatives Company Limited (FDC), Mr. Bismark  Rewane,  in a report released at the weekend by his Company, said the loss was equivalent to 4.5 percent of the total exports of Kenya or four percent of the total exports of Ghana. “This amount could fund the construction of one petroleum refinery or a modern power station with 1000 Mega Watts capacity,” he said.

Rewane, explained that  grey market is a situation in which goods are imported inappropriately into a market without the manufacturer’s consent, thereby short-changing the authorised dealers.

He said the revenue loss was too staggering when viewed on a leveraged basis of one to three (1:3). According to him, it can finance the rehabilitation of two seaports and two modern airports, with an income per capita of $1500 and infrastructure gap of $200 billion.

The FDC Chief Executive Officer rued the monumental loss of government revenue arising from the grey market which he said affects government revenue from both direct and indirect taxes.

According to him, while direct tax loss comes from the reduced sales and profit in the legitimate automobile industry, indirect tax loss comes from the custom duties and excises.

He noted that the bulk of the loss comes from the indirect taxes based on FDC’s survey. “Recent data from the CBN shows that a fall in customs and excise duties was one of the reasons the Federal Government’s non-oil receipts declined by 30.3 percent to N589.98 billion in the last quarter of 2012.

“From our investigations, the continuous decline in government customs receipts can be due to either a reduction in national import, or to increased importation through the grey market leading to avoidance of duty payment by grey market operators and corruption at the ports.

“Data collected from the Nigeria Port Authority (NPA), Manufacturers Association of Nigeria (MAN) and through independent survey of the automobile industry shows that grey import is thriving and almost at par with official import volumes. Loss to government from grey import is N85.2 billion between 2008 and 2011.”

Rewane said in some cases, automobiles that are destined for land-locked nations such as BurkinaFasso, Niger and Chad and trans-shipped through the ports find their way to the Nigerian market and custom duty payment is avoided in the process.

Leave a Reply

Your email address will not be published. Required fields are marked *