October 12, 2011
Nigeria could be losing millions in tax dollars every year because of subsidiaries registered abroad by multinational companies
ActionAid research released this Tuesday shows that 98 of the FTSE 100 companies have subsidiaries located in tax havens. While the convoluted financial dealings of firms in the City of London might seem a world away from the poor communities that ActionAid works with in Nigeria, the sad reality is that multinational companies that use tax havens could be costing Nigerians dearly.
New research shows that SABMiller, for example, has three subsidiary companies registered in Nigeria, compared with 108 in jurisdictions classed as tax havens. But this pales in significance compared with the use of tax havens by the big oil companies operating in the country.
Shell, with its massive interests in the Niger Delta, has 18 subsidiary companies located in Nigeria, but 455 in tax havens around the world. BP has six companies in Nigeria, but 537 registered in tax havens.
While this research does not prove tax avoidance in itself, multinationals need to explain why they have so many subsidiaries registered in tax havens. There are great challenges with getting accurate data on how much countries actually lose due to tax avoidance and the financial secrecy that tax havens create makes the task even more difficult. Despite this, it is suspected that the amounts lost would be enough to solve many of the country's development challenges.
Primary education in most of rural Nigeria is still conducted in child-unfriendly environments, sometimes in dilapidated buildings and occasionally even under trees. Widespread underfunding of public schools, blamed on limited resources, has grossly affected the quality of education in the country that was previously the best in the region.
Research suggests that poor and middle-class Nigerians pay proportionally more in taxes than the rich and big corporations. Urgent action is needed from the Nigerian government and the international community to change this unsustainable situation.
Greater transparency is vital both in Nigeria and internationally, so civil society can hold companies and governments to account. Many multinationals deliberately exploit the system by registering multiple companies in Nigeria. Most of the times, it is hard to know which of these registered entities have genuine operations in the country.
ActionAid and many other organisations in Nigeria are working hard to monitor government spending to make sure the poorest communities benefit and revenues are not lost to corruption along the way. However, if a blind eye continues to be turned to the huge amounts of money that could be siphoned into tax havens before it ever reaches government coffers, Nigeria will remain mired in poverty.
All of the current development challenges in the nation, which accounts for a quarter of Africa's population, are traceable to a lack of adequate resources. These resources for development could easily be generated if the attitudes of multinationals towards paying their taxes changed.
Nigerians need to play their part by demanding greater transparency and accountability in our country. But when we are dealing with multinationals listed in the FTSE 100, decisive action from the UK government and the G20 leaders also needs to be urgently taken.