Showdown over Tax Collection

13 Aug 2013

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FAAN MD and Adams  Oshiomhole

Executive Briefing

Ojo Maduekwe writes on the face-off between the Edo State Government and the Federal Airports Authority of Nigeria that led to the shutdown of the Benin Airport

When on July 30, the news hit the airwaves that “the Benin airport had been shut down by the Edo State Board of Internal Revenue (BIR), over alleged unremitted N15 million Pay As You Earn (PAYE) deductible tax from staff salary,” the impression was that the government of Governor Adam Oshiomhole orchestrated this to embarrass both the federal government and passengers.

However, as it later emerged, the airport authorities had masterminded the report to divert attention from the fact that the Federal Airports Authority of Nigeria (FAAN) had shirked its statutory responsibility to the state government.

But while passengers were stranded, the puzzle was who authorised the shutting down of the airport? The General Manager, Corporate Communications for FAAN, Mr. Yakubu Dati, had posted a statement same day absolving the organisation of blame.
In his words: “The Edo State Government, early this morning, forcibly entered the premises of the Benin Airport and shut out all workers and airport users at the airport, including air passengers and airline operators, claiming that the Federal Airports Authority of Nigeria had not paid relevant taxes, including tenement rate, to the state government.”

But the governor, Adams Oshiomhole, understood the import of the action and immediately gave his side of the story. While narrating the government’s role in the controversy, he denied that the state government shut down the airport. According to him, “The state lacked such power under Nigerian law.” Then, the question of who shut down the airport and grounded flight operations continued in the face of the claims and counter claims.

Of course, the binding string in the fracas was tax remittance. According to the state’s BIR tax audit report for the years 2004 – 2009, 2010, 2011 and 2012, as at July 30, 2013, the FAAN had an outstanding tax debt to the tune of N14,979,333.98.

An online news site in reporting the story wrote: “At the centre of the tussle are debts allegedly owed the state government by FAAN and the Nigerian Airspace Management Agency (NAMA), totalling N39.7 million. FAAN was accused of owing N15 million while NAMA was alleged to owe N24.7 million.”

To this effect, the state government through its Board of Internal Revenue (BIR) therefore served an administrative order on FAAN after duly obtaining one from a court, informing the airport manager, Sunday Ayodele of the tax debts. Ayodele’s reaction, according to reports, would be to descend on the officials of Edo State BIR, who served the notice on him.

Oshiomhole said: “When the airport manager was served the notice, he in turn, shut down the lounge and other offices. He shut it down so that nobody will go in or come out of the airport.” This, the governor noted, was to turn the heat against the state government.
In a statement made available to THISDAY, Oshiomhole said: “The Edo State Government did not seal up the airport, the revenue board staff went there peacefully to do their job. The authority of the revenue board went to serve an ‘order’ on the administrative office of FAAN, it was done in a way to ensure that it does not affect the operations of the airport knowing that the airport is a public place and as much as we want to collect taxes due to government, we don’t want to inflict pains on travellers who are not a party to the issue of tax evasion.”

Whilst the airport remained under lock and key and the blame game continued, Chairman of the state BIR, Chief Oseni Elamah, who supervised the exercise in the company with policemen, said it was the administrative office of FAAN that was locked and not gates to the airport. He however restored normalcy by opening the gates.

But by the time Elamah was reopening the airport gates said to have been shut down by Ayodele, the airport manager was nowhere to be found. Reports had it that when he was done assaulting officials of the BIR and damaging the camera used to film the exercise, he was whisked away by the State Security Service (SSS) agents, perhaps to prevent a reprisal.

Beginning with FAAN’s claim that by “Sub-Section 25, Section IV of the Laws of the Federal Government of Nigeria (Cap. F5) of 2004, establishing the Federal Airports Authority of Nigeria, it is exempted from the payment of taxes and tenement rates and any arrears whatsoever in connection thereto”, experts said FAAN was quoting a law that’s not relevant to the matter.

FAAN had insisted that the Edo State Government did not have the right to ask it to pay tenement rates. In the statement by Dati, he said: “The Authority therefore views this action of the Edo State Government as not only unlawful but provocative because it is a well-known fact that all airport lands are acquired by the federal government and are exempted from paying charges to the states where they are located.”

Dati, according to experts, would have been deemed right if the contending issue was tenement rates. But the issue being raised in the media as well as the claims made by the government and the BIR does not involve tenement rates but one of Pay As You Earn (PAYE) tax.

A statement from the BIR read: “The genesis of the Federal Airports Authority of Nigeria’s non-compliance with the provisions of the PITA, which is a federal law dates back to 2010 where as part of the tax reform programme, a tax audit was carried out on them for the period 2004-2009.”

At the end of the audit exercise, it said a tax liability of N23,400,940.00 was established and communicated to FAAN in writing with all the supporting schedules and documents. When asked to pay, FAAN refused. Not until a court order was secured and their administrative office where the general manager and accountant operate from was ordered shut.

Another incident was in 2011 where a similar exercise was carried out and an assessment was raised for the 2010 tax year. It was realised that FAAN owed tax payments to the tune of N9,568,293.90.

“They also refused to pay this liability within the statutory period. Even though we got a court order to distrain the property of the establishment, we did not execute the order, instead we went ahead to get a garnishee order before we were able to recover the debt,” Elamah said.

Also, in 2012, another assessment was carried out on the establishment and it was discovered that the authority owed taxes to the tune of N14,979,333.98. Upon the failure of the management of FAAN, Benin Airport, to pay the established liability, another distrain order was obtained from the High Court on May 3, 2013. Instead of complying with the law, Ayodele embraced the mob approach.

Experts have faulted FAAN’s action in Benin. They asked that if according to the section quoted, FAAN is exempted from paying taxes, why then should the FAAN authorities deduct from employees salary in the false guise of tax payments? And having been served court notices in the past, their compliance in payment showed that FAAN understands the position of the law as regards PAYE.

It is puzzling to many therefore, why FAAN has continued to deduct the PAYE tax from the income of workers residing in the state without remitting same to the coffers of the state government. It is common sense that if the law truly absolves FAAN from paying tax, including PAYE, why does it deduct same from its workers’ salaries every month?

It is as a result of this that experts held the opinion that the airport manager be made to face the law. Describing his action as endangering the security of the lives of the air passengers and the property of the airlines, the state government and the federal government, experts argued that Ayodele should be made to face the law because no such thing would have happened in developed climes.

Ayodele’s action is said to have amounted to taking hostage all the passengers locked inside the airport. Those who had flights to catch that morning were equally locked outside. FAAN, it is argued, has more at stake if affected airline passengers decided to exercise their constitutional rights and sue the agency for the misguided actions of its manager.

Importantly, experts reckoned that constitutionally established federal authorities like the office of the Accountant General of the Federation should help the BIR in tackling the menace of tax evaders (mostly federal MDAs), since part of the money that would be retrieved from them belongs to the federal government as tax remittance by the Edo State Government.

Above all, public office holders must desist from politicising issues of national importance as seen in the tax evasion case in Edo State.

Tags: Politics, Nigeria, Featured

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