I had the privilege to stumble on a report titled: “Pandora Papers: Inside Peter Obi’s secret businesses and how he broke the law”. It was written by one Taiwo-Hassan Adebayoand published in Premium Times Newspaper on the 4th day of October 2021.
Most Nigerian and indeed my humble self, had perceived Peter Obi to be the epitome of transparency, good governance, patriotism and economic astuteness.
This perception heightened my curiosity to read through the article in order to discover the hidden secrets which the article had to bear against the former two term Governor of Anambra State and the Vice-Presidential candidate of the People’s Democratic Party in the 2019 national election.
Having read through the article, my lawyerly self queried whether Peter Obi actually violated the law as alleged in the article. This prompted my decision to dispassionately test the allegations against Peter Obi against the provisions of the law.
The allegations in the article basically bother on allegations of tax evasion and non-declaration of certain jointly owned assets by Peter Obi. It was argued that Peter Obi committed the offence of tax evasion by establishing a company outside the shores of Nigeria in “havens where little or no taxes are paid”.
It was further argued that Peter Obi committed a crime by non-declaration of some of his jointly owned assets outside the shores of Nigeria and failure to resign from the board of directors of those companies 14 months after assuming the office of the Governor in Anambra state. These allegations shall be addressed seriatim.
It must be stated there is a world of difference between allegation, facts and evidence. Allegation are mere claims and assertion of a person’s wrong doing that are not yet proven. Facts are events that are confirmed or verifiable. While evidence are concrete facts used to support an assertion or a claim.
At the moment, the claims of the Adebayo against Peter Obi are still within the realm of mere allegations.
However, this article will proceed with the assumption without necessarily conceding that Adebayo’s claims against Peter Obi are factual, as the said Peter Obi still enjoys the presumption of innocence in his favour as protected by the Constitution of the Federal Republic of Nigeria. This presumption stands unshaken until otherwise proven.
A cursory look at Adebayo’s article would reveal that the author seems to have confused tax avoidance for tax evasion. It is appreciated that both terms may easily be mistaken one for another or erroneously used interchangeably except for persons who are well informed about tax laws.
In simply terms, tax evasion is an offence, whereas tax avoidance is not an offence. At this point, it must be stated that on the authority of Section 36 (12) of the Nigerian Constitution, a person shall not be held liable for an offence except such offence is expressly defined by written law and a sentence specifically prescribed thereto.
The case of George v. FRN (2015) All FWLR (Pt. 718) 879 is apt in this regard.
In Nigeria, tax evasion used in two sense. First, as a specific offence. Second, as generic expression for acts of tax non-compliance or violation of tax laws. Section 26 Value Added Tax Act 1993 and Section 164 Custom and Excise Management Act 1959 are the two known tax law provisions that specifically provide for the offence of tax offence.
Every other tax offence, including, omitting or understating income in order to make incorrect return; failure to keep the required records; refusal or neglect to pay tax; dishonest declaration of income, earnings or assets; fraudulent tax returns, etc. are loosely referred to as tax offences.
However, the definition of the “tax evasion” in the two aforementioned tax law provisions has nothing to do with a business man deciding which part of the country to invest his legitimately earned money. It would be preposterous and despotic for any government to even prevent any entity from making such business decision when the same government do solicit for foreigners to invest in the Nigerian economy.
Why should a Nigerian be penalised for deciding to invest his resources in other countries irrespective of the prevailing tax rate in that country? Indeed, the question to ask is: is there any Nigerian law that prohibits and penalises a Nigeria from investing in any jurisdiction outside Nigeria? Adebayo did not mention any. My guess is, he could not find any.
Business owners and entities ordinarily direct their business undertakings in such a way as to avoid financial liabilities including payment of tax. This is what is also known as tax planning. To quote Lord Clyde in the case of Ayrshire Pullman Motor Services and D. M. Ritchin v. Commissioner of Inland Revenue, (1920) 14 Tax Cas 754, 763–764: “No man in this country is under the smallest obligation moral or otherwise so to arrange his legal relations to his business or to his property as to enable the Inland Revenue to put the largest possible shovel into his stores.
The Inland Revenue is not slow and quite rightly to take every advantage, which is open to it under the taxing statutes for the purpose of depleting the taxpayer’s pocket. And the taxpayer is in like manner entitled to be astute to prevent so far as he honestly can the depletion of his means by the Revenue.
Every company has the option of carrying out tax planning in order to minimize tax liability within the law of the territory in which it operates”.
There are tax avoidance schemes that is even recognized by tax laws. Individuals or companies may avoid payment of tax by simply increasing its capital expenditure in order to reduce its taxable profit.
In this instance, the company would be said to be taken advantage of section 24 of the Company Income Tax Act (CITA) which includes certain capital expenditures as allowable deductions. This would be regarded as measures taken to reduce its tax liability. Provided such act is not prohibited by law, the company cannot be said to have committed any tax offence.
Provided that a particular scheme to avoid or reduce tax liabilities are not prohibited by law, they are still within the realm of tax avoidance and no criminal liability can accrue thereto. The best the government can do to address the incidence of tax evasion is to identify tax avoidance schemes and then get the legislature to criminalise it.
Then again, the legislative enactment criminalising such act has effectively moved from tax avoidance into the realm of tax evasion. Until there is a law prohibiting a Nigerian from investing outside the shores of Nigeria, Peter Obi cannot be said to have committed the offence of tax evasion or any other tax offence(s), however so called.
On the issue of non-declaration of jointly or partly owned foreign asset: the law which addresses this subject is majorly the constitution and the Code of Conduct Bureau and Tribunal Act.Section 11 (1) (b) Part I Fifth Schedule to the Constitution Adebayo referred to requires a public officer to declare his properties, assets, and liabilities. The said provision did not specifically require the declaration of jointly or partly owned assets.
It is appreciated that a public officer is required to declare his assets in view of the public trust reposed in the office they occupy. It would be irrational to expose assets that are partly owned by other individuals, when they are not the ones occupying the public office in question.
Some business investors actually prefer to invest quietly, hence, a declaration of their jointly owned assets breach that business trust which they expect from their business partners. The otherwise could amount to a breach of the right to privacy and quiet enjoyment of the property of these individuals.
It is to be noted that Section 6 (b) of the Code of Conduct Bureau and Tribunal Act did not prohibit a public officer from holding an interest in a company. It only prevents the said public officer not to personally “engage or participate in the management or running of any private business, profession or trade”.
To my mind this does not preclude a public officer to shut down his hitherto existing business or profession simply upon his assumption of public office. It would be unreasonable for the law to expect that of such public officer.
Provided the public officer is not personally involved in administering the business while in office, he is in the right side of the law. The appointment of nominee directors by companies are legitimate and well known corporate law practice recognised by the Companies and Allied Matters Act.
More so, Nigerian law recognises that companies have distinct personalities different from its shareholders and directors.
As such, it is legally incorrect to say that a person owns a company. Adebayo failed to tie down Peter Obi’s personal involvement in the administration of the companies while occupying the office of the governor of Anambra State.
Did Peter Obi Actually Break The Law?
Eti Best Herbert is a legal practitioner and legal research consultant.
He is the Head of Practice of Olive Branch Attorneys.