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PHCN Privatization : How FG lost N387m tax to Canadian Company – Senate

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phcn-privatization-:-how-fg-lost-n387m-tax-to-canadian-company-–-senate

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By Henry Umoru

 THE Senate has uncovered  how the  Federal government lost N387 million, withholding Tax to Canadian Company , CPCS Transcom Limited,  during the privatization of defunct  Power Holding Company of Nigeria (PHCN).

The details of the contract for the provision of transaction advisory Services  regarding 18 successors companies of defunct PHCN was contained in a query by the  Office of Auditor General of the Federation, OAUGF which was submitted to the Senator Matthew Urhoghide, Peoples Democratic Party, PDP, Edo South led Senate Committee on Public Accounts.

The Senator Urhoghide led  Committee is relying on the query raised by the Office of the Auditor General of the Federation in the 2015 report and brought before it for probe and subsequent presentation to the Senate at Plenary.

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According to OAUGF,  CPCS Transcom Limited was appointed as sole consultant 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)

The report stated that N383 billion 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 N3.8 billion was paid as service charge to the Canadian Company by the successor companies without accounting for the mandatory 10% Withholding tax amounting to N387.7 million contrary

to Financial Regulation.

The query read, “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 on  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.”

Responding to the query of AuGF,  the Director General of BPE. Alex Okoh in a letter dated 19 April,  2018, requested for the transfer of withholding tax of N387 million to the Federal Inland Revenue  Services (FIRS).

On its part, CPCS Transcom Limited in a letter written July 26, 2018 claimed that there is an income tax treaty (Agreement between the government of Canada and Federal government 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 at the FIRS website  .

The company said, “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 taxed in Nigeria.”

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