The activities of International Oil Companies operating in the oil sector and milking the economy came to the fore as the Tax Appeal Tribunal, Lagos Zone, on Friday ordered Mobil Producing Nigeria Unlimited to pay 83.4 million dollars (N13 billion) education tax to the Federal Inland Revenue Service (FIRS).
Mobil Producing Nigeria Unlimited, an ExxonMobil subsidiary operates an oil export terminal off Akwa Ibom coastline connected by a pipeline network to its two oil blocks in a Joint Venture with NNPC.
The tribunal gave the order while delivering judgment on an appeal filed by the oil company against the FIRS.
Chairman of the five-man tribunal, Mr. Kayode Sofola (SAN), said the amount represented the company's education tax liability for 2008 alone.
The company had instituted the appeal on May 5, 2011 when FIRS issued with it an education tax liability of 83.4 million dollars for 2008.
The appellant's counsel, Mr T. Emuwa, had claimed that the assessment breached an agreement signed by the company with the Federal Government of Nigeria and the Nigerian National Petroleum Corporation (NNPC).
Emuwa said the Memorandum of Understanding (MoU) was first signed in 1986 and renewed in 2000.
He said the 2000 MoU allowed the company to deduct all amounts paid to other agencies from the tax due to the federal and state governments
FIRS had through its counsel, Mrs B.H. Oniyangi, claimed that the 2000 MoU was signed for a three-year term, adding that its validity ended on Jan.1, 2003.
Oniyangi held that the federal government, through a letter issued by the Department of Petroleum Resources (DPR) on Jan. 17, 2008, also confirmed that the MoU had lapsed.
According to her, the 2000 MoU was replaced by the Petroleum Profits Tax Act (PPTA) which was used to issue the disputed assessment.
Delivering the judgment, Sofola agreed that the said MoU was only for a three-year term, noting that there was no evidence before the panel that it was renewed.
He said: ``The 2000 MoU thus expired at the end of 2002. The parties never did anything to keep it alive longer, as stated in clause 7.1.
``In effect, clause 7.1 contains an option to renew, exercisable at the joint instance of all the parties. This option was never exercised, and thus no renewal or extension was triggered.’’
Sofola said the appellant was no longer entitled to make deductions allowed under the 2000 MoU, in calculating their education tax.
``The PPTA is the legislation in force and cannot be subordinated to the mere contemplations of the MoU.
``We uphold the respondent's (FIRS) assessment of the appellant to education tax of $83,414,793.
``We order the appellant to pay accordingly,’’ the tribunal chairman added.