Insight

Systemic abuse of processes in aircraft importation

Notwithstanding the application, the prerogative for any such approval is given to the CGC, which if favourably considered, mandates the NCS to then charge the import duty applicable at the time of importation on the good in question, for its continued stay and use within the country.

Rather than explore this window of opportunity for the continued legal use of their aircraft assets within the country, these private aircraft owners and or their representatives have exploited their bogus re-exportation procedure to misrepresent to the NCS as if they were just bringing these aircraft into the country for the first time, and then proceeding to re-apply for fresh TIP with a new start date for another possible 24-month sojourn.

All the while, these private aircraft owners on TIP are usually required and do post Bonds equivalent to a cumulative total of 30% plus of the aircraft value as security for the 24-month period for which the temporary admission is sought. Of course, tying down 30% of the value of an aircraft asset worth over US$45m would be unfathomable for these owners, hence the need to grossly undervalue the asset solely for the purpose of posting a Bond far less than required, thereby defeating the essence of the security required in the first instance. According to the committee, “No doubt these dubious acts could never have been brazenly perpetuated through the ages without the active connivance and collusion of some highly placed and unscrupulous government officials, who would peddle their influences to ensure the bidding of their wealthy cronies.”

“Some of the inferences that can be made from the findings of this exercise by the NCS corroborate the long-held notion that the rich hate to pay their bills, otherwise what rationale is there to tie down 30% of the value of your aircraft, when the import duty required to be paid to allow life-long unfettered use is only 5%. It defies rational thinking and logic. “It is also very important to understand the methods used and how these few highly placed Nigerians have successfully exploited the system for so long with a view to perpetually defraud the government.”

As determined during the NCS’ aircraft verification exercise, these private aircraft owners from foreign offshore companies in which they are Directors to warehouse the aircraft assets as owners and then enter into Lease Agreements with these companies as required by the TIP application, invariably with themselves. Furthermore, they were said to have procured Pro-forma invoices in some instances through other thirdparty faceless aircraft brokerage firms reflecting a value way below fair market value in order to undervalue the aircraft, thereby reducing the Bond security exposure.

Unfortunately, as is typical of most government agencies, the necessary scrutiny and due diligence required is rarely exercised, allowing most of these nefarious acts to fall through the cracks, intentionally or otherwise. For instance, what steps were taken to confirm the actual existence of the supposed in-country project for which a copy of the complete contract between the importer and the main in-country contractor was requested? No doubt, a project for which the aircraft is being imported on a temporary basis and with a valid contract defining scope should not be difficult to verify. But obviously, these requirements are merely necessary paperwork to fulfill all righteousness, with some officials of the NCS complicit as well.

Not a few believe that the aircraft verification exercise mandated by the Comptroller General of Customs and conducted by the NCS is highly commendable and has shown clearly that the Nigerian elites would stop at nothing to defraud the government. This is not minding the fact that the already skewed nature of the polity has placed them in a financially advantageous position over the majority of the citizens and what ordinarily would have been their legitimate contribution to the state is also being deliberately withheld by their dubious exploitation of the system.

The objective of the Convention on Temporary Admission was never intended for the personal aggrandizement of the rich and powerful to the detriment of the state, but rather for the structured and deliberate simplification and harmonisation of international Customs procedures, for the facilitation of world trade. World trade is not defined as the use of personal luxury aircraft by the Nigerian elites, politicians, and banking institutions.

At the last count, the NCS Verification Committee identified about ninety privately owned aircraft that have not paid the statutory import duties estimated at over N30 billion. These are monies due to the Federal purse and they must be fully recovered, with applicable sanctions brought to bear on all who have illegally imported their private aircraft into the country, irrespective of their stature or position in the society.

As a matter of fact, this is a very good opportunity for the Federal Government to demonstrate its commitment to the rule of law and show that no Nigerian is above the law. Realising the national security and sovereignty implications involved in the operations of private aircraft within the Nigerian airspace, what structures have the Ministries of Aviation and Finance put in place for the necessary cooperation to ensure that the NCS and NCAA are in constant communication exchanging information back and forth? What proactive measures have been put in place since the report of the NCS’ Aircraft Verification Committee based on its findings and recommendations, to ensure that the various loopholes being dubiously exploited by these wealthy and powerful Nigerians are permanently plugged to avoid future revenue leakages? For instance, has the NCS contemplated the automation of its processes particularly in this case the TIP procurement process, to forestall the deliberate misrepresentations by some unscrupulous private aircraft owners? Also, considering the fact that most of all the privately-owned aircraft advertised by the NCS are foreign-registered, it goes to reason to assume that they would in all likelihood be crewed by foreign nationals of the state of Registry of the aircraft or at best crew members with the necessary license endorsements by the aircraft State of Registry. In this regard, what policy has the Ministry of Aviation through the NCAA put in place to ensure that qualified Nigerians are not left unemployed? Or what long-term arrangements have been put in place to ensure that these private aircraft owners at least contribute to the human capital development of the aviation industry?

All in all, there have to be some added benefits derivable from the continued operations of these privately owned aircraft within the Nigerian airspace, otherwise, it would amount to double jeopardy for the country – losing accruable revenues through the dubious exploitation of the system and creating unemployment, thereby exacerbating the already dire socioeconomic situation in the country.

The CGC of the Nigeria Customs Service and his able lieutenants have started well by confronting these long lingering issues and should be applauded for their resilience and dogged determination to achieve success. In the final analysis, it is pertinent to note that similar precedents have been set in other countries under similar circumstances. For instance, the Brazilian government in June 2012 acting through a combined team of its Tax, Police, and aviation authorities seized and auctioned nine business jets owned by some of their elites.

These Brazilians were found to own and use these aircraft but registered them overseas to avoid Brazilian State and Federal import taxes of nearly 35%. Incidentally, Brazil employs the 60- day tax rule allowing foreign registered aircraft to remain in the country for a cumulative period of a maximum of sixty days in any calendar year without paying import duties. The NCS’ actions are in consonance with the provisions of the law and mobile assets as established corporate entities or individuals before the law are not exempted from their statutory tax obligations, howsoever veiled.

 

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