Illegal Tax Deductions: GE Defiant As Union Ultimatum Expires

Insiders familiar with the dispute said GE has been inventing different delay tactics, including using consultants to scuttle or repudiate decisions previously reached and accepted by the parties.

L-R: The Secretary-General of NUPENG and his counterpart in PENGASSEN.
L-R: The Secretary-General of NUPENG and his counterpart in PENGASSEN.

A few days before the ultimatum by the two main unions in the oil and gas sector expires, there is still no indication that GE International Operations Nigeria (GEION) is moved by the unions’ threat of industrial action.

In a letter jointly signed by the General Secretary of PENGASSAN, Comrade Lumumba Okugbawa; and the General Secretary of NUPENG, Comrade Olawale Afolabi, dated October 28 and addressed to the Group Managing Director of the NNPC, the unions said they had reached their wit’s end.

The two-week ultimatum expires on Friday, November 22.

The letter was also copied to the Minister of Labour and Employment; and the Director General of the Department of State Services.

Referring to the intransigence of GE in spite of several meetings and agreements for the company to refund taxes illegally deducted from Arco, the unions said, “We see the attitude of GEION as an affront and total disrespect to constituted authorities.

“It is in the light of this that the two unions are giving 14 days ultimatum, with effect from today, Monday 28th October 2019 to all relevant authorities to compel GEION and any other concerned parties in this matter to do the needful for our members to get their final entitlement paid without further delay.”

As the ultimatum expires, it is unclear at the time of this report what the unions plan to do next.

One insider said, “We don’t know if the unions will eat their words or what NNPC and those copied in the letter plan to do as the ultimatum expires this week. But what is clear is that GE is not moved, one bit. Can they behave this way in the US, their home country? This is sad.”

Arco had explained to the unions that its inability to pay the benefits and entitlements of some of its members, five of whom have died while waiting, was because of the deliberate refusal of GE to refund taxes illegally and unilaterally deducted at 10 per cent instead of the 5 per cent permitted under the contract. GE has ignored letters by FIRS that 5 per cent is the applicable rate.

Records available indicate that the FIRS had flagged significant discrepancies in remittances made by GE between 2009 and 2015.

After a reconciliation meeting between May 17 and June 21, 2019, for example, the FIRS Chairman, Tunde Fowler, wrote a letter dated August 7, 2019 in which he noted wrongful withholding taxes deducted by GE amounting to N328,855,903.10 between 2009 and 2015.

In the same letter, Fowler also noted that between 2011 and 2015, the dollar differential of withholding taxes wrongfully deducted by GE was $1,716,976.96.

The figures above do not, however, cover all the illegal deductions disputed by Arco and for which it has repeatedly presented evidence.

Sources close to the company said, for example, that the value of 12 of invoices for which GE could not provide credit notes in 2014 stood at $563,861.05; and that the dollar value of GE’s wrongful deductions over the years could be as high as $3m, apart from the excess in other currencies.

The ultimatum by PENGASSAN and NUPENG came one month after the Ministry of Labour and Employment hosted a second stakeholders’ meeting to settle the long-running dispute.

After the meeting on September 24 involving GE and Arco, also attended by members of PENGASSAN and NUPENG, and the FIRS, it was decided in a letter dated October 4, 2019 signed by a director in the Labour Ministry, Mrs. O.U. Akpan, that, “GEION should within seven days apply to the FIRS and request for the refund of the over-deducted sums paid to FIRS as agreed during the reconciliation exercise.”

Akpan, also said, “All deductions made by GEION on behalf of Arco substantiated with documentary evidence with the objective of remitting to FIRS, but which were not remitted to FIRS should be refunded to Arco within three weeks.”

The seven days have since expired, with GE remaining defiant.

The September 24 meeting was the second hosted by the Ministry this year. The first was on May 24.

Insiders familiar with the dispute said GE has been inventing different delay tactics, including using consultants to scuttle or repudiate decisions previously reached and accepted by the parties.

“They just feel they are above the law and no one can do them anything,” one source said.

A group called Coalition for Truth in Nigeria, had published an advertorial in some national newspapers, accusing GE of using strong-arm tactics against Arco. The group also accused the FIRS of complicity.

In a letter on January 14, 2019, the FIRS had given GE a seven-day deadline to defray its liabilities or provide evidence of payment.

The letter to GE with ref: FIRS/SCLI/ARCO/1/2019/14/1, said, “Failure to defray the above liability (225,097.11 euros; $2,626,970.38; N237,443,292.60) or provide evidence of payment within the stipulated time will result in enforcement action taken against you.”

Nothing has been done since.

In recent times, GEION has been the subject of interest in the international press. Earlier in the year, the French government had fined GE 50million euros for creating just 25 out of the 1,000 jobs it promised to create in 2015 when it used the offer as subterfuge to take over Alstorm’s energy business.

Also, a report by Wall Street Journal said Harry Markopolos, who famously blew the lid on Bernard Madoff’s Ponzi scheme, accused GE of hiding $38billion in potential losses, adding that, “the company’s cash and debt position were far worse than it had disclosed.”

An industry source in Nigeria said, “It appears that it’s only in Nigeria that GE thinks it can do what it likes without consequence.”

Unconfirmed reports said the National Assembly may wade into the matter soon.

The Interview Editors

Written by The Interview Editors

The Interview is a niche publication, targeting leaders and aspiring leaders in business, politics, entertainment, sports, arts, the professions and others within society’s upper middle class and high-end segment in Nigeria.