15TH ANNUAL TAX CONFERENCE
FRAUD, CORRUPTION AND TAXATION
PAPER PRESEENTED BY
EMEKA IFEZULIKE FCA, ACFEI,ACIT
INTRODUCTION
There is a bizarre alliance rooted in history between taxation, corruption and fraud. By virtue of its nature-(an imposition charge, levy) – demanded by an „authority‟- taxation has remained a practice that has been resisted, been the cause of revolutions and overthrow of governments and is convulsed by monumental fraud and corruption.
No Nation can effectively grow without the creation of „abundance‟ that will fund growth – and that „abundance‟ is created through the pooling of taxes by citizens and corporate bodies, that will build a self sustaining interface of accountability, performance evaluation, between citizens of a state and public servants. Taxation is integral to nationhood however defined.
FRAUD CORRUPTION AND TAXATION
Every act of c0rruption ties in with perversion of the integrity of a common societal heritage, a poisoning of the community life sustaining springs of well being and a gradual but steady killing of society. History records the decline and extinction of many nation states because of corruption. What makes our beloved nation different?
I had the honour and privilege to serve on the founding board of the EFCC from 2003 to 2009 as the Chairman of the Sub committee on Government Revenue Fraud.
It was a vastly enriching experience with regards to various schemes, manipulations and shenanigans that fraudsters employed to steal public funds. I will share some of these experience with us at this conference and attempt to proffer some of the “minding the gap” solutions that we identified.
A FEW EXAMPLES – Stealing, conversion and diversion of FIRS cheques.
WUSE COMMUNITY BANK: This outfit was a serial fraudster specializing in fraudulent diversion of cheques made out in favour of FIRS from key government departments.
Everybody was on the take, bankers, accounting staff of government departments, and all other „eyes wey see‟. Sums involved as at 2003/2004 was estimated at over 500m naira. A certain Mohammed Dangana was the GM/CEO of this Community Bank as at that time.
Gateway Bank and Trans International Bank were conduits for the suppression, diversion or direct conversion of such cheques made out in favour of FIRS.
A FEW EXAMPLES – Stealing, conversion and diversion of FIRS cheques.
A key bank staff of Gateway bank that bolted as at the time of the investigation was one BunmiEsan. A certain Mr. T. Uwhubetine who was not a bank staff featured prominently as an „independent tax collection agent‟. A conservative estimate of loss of government revenue as a result of the activities of these fraudsters can be put at over 3 billion naira over the period 1996 to 2003. Recoveries made as a result of our committees efforts was well in excess of 6 billion naira.
A FEW EXAMPLES – Stealing, conversion and diversion of FIRS cheques.
Scouring of ministries and Government departments – especially the obscure ones for cheques made out in favour of FIRS for taxes withheld or VAT was a very fertile farm land for fraudsters.
Without prejudice some of the banks that featured prominently in our investigations during this era of massive diversion of tax revenue include – Gateway Bank Plc, Platinum Bank Plc, Access Bank Plc, Midas Bank Plc, Centerpoint Bank Plc and Trans International bank. It was a wild era in banking.
Key Government departments involved included: Federal Capital Territory, FCDA, FCT Water Board, Federal Ministry of Agric, Federal Ministry of Power and Steel, National Hospital Abuja, National Boundary Commission & Nigeria Export Promotion Council, Abuja.
A FEW EXAMPLES – BRIBERY AND SYSTEMIC CORRUPTION
BRIBERY: Between 2000 and 2003, a junior level cadre staff of FIRS in Port-Harcourt, Rivers State successfully set up consulting outfits called Igonel Nigeria Limited and Igonel Telecommunication. The MD/CEO of these outfits was Mr. Isaac.N. Igoma who was also a staff of FIRS. He was not a member of CITN nor any known relevant professional organisation. But he was a tax consultant and a major philanthropist amongst the Abua Community in Rivers State. This MrIgoma was the person that orchestrated the receipt of $2.5 million from the Haliburton Group –
A FEW EXAMPLES – BRIBERY AND SYSTEMIC CORRUPTION
an amount that was highlighted as bribe money to Nigeria tax officials by Haliburton, who subsequently faced sanction from the US Office for foreign corrupt practices.
Investigations revealed that Isaac Igoma had perfected the act of diversion of FIRS cheques, outright stealing and massive collection of bribes from companies and Organisations in the Rivers State. He was not only loud and conspicuous; hiring private jets for social junkets in Equitorial Guinea, Malabo and other neighbouring states, his status was not diminished even in the FIRS PH office where he was a level 06 officer.
A FEW EXAMPLES - FORGERY
FORGERY: Sometime in 2002, CFAO NigPlc through their Financial Controller Mr R. Voss engaged a firm named NIC –ADEBCO CONSULT as consultants for the purposes of tracking and collecting With-holding Tax credits due to CFAO for an agreed commission.
Apparently, the consultants had engaged the services of an insider in FIRS, who negotiated for himself a 50% share of the commission due to the consultants from CFAO. Wherever there is money to be made, avarice and greed lurks around. It did not take long for this arrangement to mutate and translate into a massive scam involving the forgery of fake and non existent withholding tax receipts amounting to N555,241,118.63.
MINDING THE GAP
WHAT TO DO?
1. In Nigeria, there is a clear need to create abundance – A pool where everybody will have a stake in. Is Nigeria a money bag of salt? The answer is simply no. Even bags of salt do get exhausted and do get replenished. Taxation is a civic duty.
2. The need for a simplified tax code that will spell out the general rights and obligations of the tax payer. A clear interface between FIRS or State Board of Internal Revenue and tax payers.
MINDING THE GAP
EMBRACING E-TAX CONTROL PLATFORM:- A pursuit of a vigorous policy of processing data, receipts and credit notes and prompt notification of beneficiaries of such credits – creation of an email or telephone sms platform that will promptly interface with the Tax Agent (Withholding) FIRS of State Board of Internal Revenue and Contractor, Consultant or other third parties whose taxes have been deducted at source. Such an electronic platform executed at real time will go a long way to reduce fraudulent practices.
MINDING THE GAP
BUILDING OF A ROBUST TAX DATA BASE:- Tax evaders are like serial killers. They strike again and again. They leave a pattern. Such persons or organisations should be tagged like they do to sex offenders abroad and if they remain incorrigible, made public.
There are agencies and organisations that should naturally have a meaningful and clear seamless interface with FIRS or State Boards of IRS. Corporate Affairs Commission and
banks should technically be in bed with tax authorities to ensure that numbers provided by individuals and organisations reveal integrity. It‟s a monumental disgrace and shame to the audit and accounting profession that most companies and organisations somehow manage to structure different numbers to various agencies as need arises.
MINDING THE GAPS
UNRELENTING: is a good word when you fight a stubborn enemy. Endless pursuit determined to catch up with offenders no matter how long and wherever they hide. Even estates of the departed should be subjected to full tax and criminality audit before inheritance laws apply.
TAX PRACTITIONERS: A clear definition and qualifying criteria must be put in place. All tax practitioners must operate in clear transparency to regulatory authorities like FIRS, State Boards of IRS, EFCC, SCMUL, NFUI and CITN.
MINDING THE GAP
9.A CODE OF CONDUCT is essential and the practice of tax consultancy must not be an all comers affairs. Sanctions must be carefully developed and all fraudulent practitioners either barred from the practice or sanctioned accordingly.
10.THERE MUST BE NO SACRED COWS.
America has convicted the following celebrities for tax fraud. 1 / Matthew Stewart / Home and garden guru / $250,000 in back taxes & fines2 / Wesley Snipes / Hollywood Actor / 3 years in jail
3 / Willie Nelson / Music Star / $16million in back taxes and fines
4 / Nicolas Cage / Hollywood Actor / $6million in back taxes and fines
5 / Marc Anthony / Superstar husband of Jenifer Lopez / $2.5million in back taxes and fines
6 / Armie Lei bovitz / Celeb Photographer / $2.1million in back taxes and fines