Facts have emerged on how the Federal Government lost N387 million Withholding Tax to a Canadian firm, CPCS Transcom Limited, during the privatisation of the defunct Power Holding Company of Nigeria.
The details of the contract for the provision of transaction advisory services regarding 18 successors companies of the defunct PHCN was contained in a query by the Office of the Auditor General of the Federation, which was submitted to the Senate Committee on Public Account, chaired by Senator Mathew Urhoghide.
According to OAUGF, CPCS Transcom Limited was appointed as sole consultant Privatisation Advisory Services of the Distribution and General Company created out of PHCN in December, 2010 at the cost of 1 per cent of the proceeds of the sale of a minimum of 51% of FGN’s equity holding in the successor companies.
It was gathered that N383 billion was received as proceeds from sales of PHCN Generation and Distribution companies, which represented 99 per cent of the total cost, while the balance of 1 per cent, amounting to N3.8 billion, was paid as service charge to the Canadian company by the successor companies without accounting for the mandatory 10 per cent Withholding Tax, amounting to N387.7 million, contrary
to Financial Regulation.
The query reads: “A company was appointed as sole consultant for the Privatization Advisory Services of the Distribution and General Company created out of PHCN in December, 2010 at the cost of 1% of the proceeds of the sale of minimum of 51% of FGN’s equity holding in the successor companies (SCs).
“Audit scrutiny revealed that the sum of N383,894,023,770.79 (Three hundred and eighty-three billion, eight hundred and ninety-four million, twenty-three thousand, seven hundred and seventy naira, seventy-nine kobo) was received as proceeds from sales of PHCN Generation and Distribution companies which represented 99% of the total cost, while the balance of 1% amounting to N3,877,717,411.82 was paid as service charge to the consultant by the successor companies without accounting for the mandatory 10% Withholding tax amounting to N387,771,741.82 contrary to Financial Regulation 234(i) and (ii).
“The Director-General of BPE has been requested to explain the circumstances surrounding the payment to consultant the sales proceeds at source without deducting
the mandatory 10% WHT.
“Also, the sum of N387 million should be recovered from the consultant while
particulars of recovery are forwarded for audit verification.”
In response to the query of the AuGF, the Director General of BPE. Alex Okoh, in a letter dater April 19, 2018 requested for the transfer of withholding tax of N387 million to the Federal Inland Revenue Services.
But CPCS Transcom Limited in a letter written on July 26, 2018 claimed that there is an income tax treaty (Agreement between the government of Canada and Federal Government of Nigeria for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes and capital again) between Nigeria and Canada.
The agreement is available on the FIRS website, it said.
The company added: “We would like to confirm that we have paid taxes in Canada and as per provisions of the agreement.
“CPCS being a Canadian entity having paid incomes taxes in Canada for the revenue earned associated with the project is not required to pay additional taxes in Nigeria.”