The Federal Government of Nigeria has announced its intention to recover more than N553 billion in unremitted taxes from international petroleum shipping companies operating in the country. Abdullahi Aliyu, a director at the Federal Inland Revenue Service (FIRS), emphasized that recouping this sum, which has accumulated between 2010 and 2019, would contribute to addressing the nation’s budget deficits. He suggested that the N553 billion in unremitted taxes, representing 5.03 percent of the overall budget deficit of N11.34 trillion, could serve as an alternative to borrowing and help alleviate Nigeria’s economic challenges.
Aliyu made these remarks during a virtual summit organized by the Nigerian Chamber of Shipping (NCS), held on Wednesday under the theme “Sensitizing the Nigerian maritime industry on the new tax policy and objectives.” He pointed out that while shipping companies involved in dry cargo activities and foreign airlines have been compliant with tax laws, many operators in the oil sector have neglected their tax obligations.
According to Oluwole Oni, assistant director of tax at FIRS, the agency has already initiated measures to prevent disruptions in the global shipping business. In December 2021, the planned taxation exercise was advertised to inform and prepare the shipping companies. Oni highlighted that non-resident vessels earn freight income from transporting petroleum products, such as crude oil and gas products, from Nigeria to locations outside the country. As per the Companies Income Tax Act (CITA), any freight income attributable to Nigeria is subject to taxation.
To ensure compliance, FIRS has sent official letters to the companies that owe taxes for the period between 2010 and 2019. These companies are expected to respond within 30 days, which may include acknowledging receipt, seeking clarification, or making the necessary payments. Oni stressed that registration with FIRS is the first step towards compliance and noted that many operators in the sector are yet to complete this process.
Georgia Spencer-Rowland, the senior advisor for shipping policy at the International Chamber of Shipping (ICS), expressed concern that the communication regarding the tax regime had not been effectively conveyed to ICS members. She pointed out that ICS comprises over 80 percent of the world’s merchant ships and 40 national ship-owners associations. In light of this, she encouraged FIRS to issue an official document clarifying the grace period allotted for tax implementation. Additionally, she sought clarification on whether the taxes would affect inbound or outbound ships and whether ICS members would be allowed to participate in the Presidential Technical Committee before the implementation of the taxes.
The Nigerian government’s initiative to recoup unremitted taxes from international petroleum shipping companies aims to bolster the country’s revenue and address budget deficits. By enforcing tax compliance among operators in the oil sector, the government seeks to create a fair business environment for local companies while ensuring that non-resident vessels contribute their share of taxes.
