The Federal Government has accused oil companies of not paying stipulated gas flaring penalties, amounting to loss of revenue in billions of dollars into government coffers.
Minister of Finance, Kemi Adeosun, said the companies are taking advantage of the wording in the legal framework which stipulates charges instead of penalties for gas-flaring.
Speaking in Abuja, Adeosun explained that the legal framework for the gas-flaring penalty was drafted as a charge, which is tax deductible.
She said: “What do the international oil companies do? They flare; they pay the charge on which they get tax relief. That’s just bad drafting. The government is approaching lawmakers to amend the law and have the word ‘penalty’ replace ‘charge’. Just that one word has potentially cost us billions of dollars.”
In the petroleum industry across the globe, oil companies flare natural gas that is produced along with crude instead of harnessing it because that can be costly or difficult for security reasons. Nigeria has sought to limit the practice over the years as it pollutes the environment and contributes to global warming.
“Nigeria is recovering from a contraction of its economy in 2016, the first in 25 years, and is seeking revenue sources to plug a $25 billion infrastructure gap and fund a record 2018 budget of N8.6trillion presented in December.
“The government is also updating the tax law and going after defaulters, with the intention to boost collection and raise the country’s tax-to-GDP ratio, currently at 6 percent and among the lowest in the world,” Adeosun stated.
She added that Nigeria in the past had never focused much on tax revenue because of its reliance on oil income that funds most of the government spending.