The Governor of the Central Bank of Nigeria, Godwin Emefiele, and the Chairman of Zenith Bank Plc, Jim Ovia, have descended into a major tax avoidance scandal in Europe following revelations that they most likely skipped the payment of about £11million value added tax while importing luxury jets into the European Union.
The two men are among a number of personalities around the world believed to have used artificial leasing schemes to avoid VAT on jets imported into the EU, PREMIUM TIMES can report.
The revelations came to the fore as more than 380 journalists from 96 media organisations in 67 countries scrutinized leaked data obtained by German newspaper, Suddeutsche Zeitung, and the International Consortium of International Journalists (ICIJ) from two offshore secrecy providers (Appleby and Asiaciti Trust) and 19 secrecy jurisdictions around the world.
The leaked 1.4 terabyte data, now dubbed Paradise Papers, contains 13.4 million records and is no doubt one of the biggest leaks in history.
For several months, ICIJ partner media from 67 countries pored over the gigantic data, which cover a period of nearly 70 years, from 1950 to 2016. PREMIUM TIMES is the only Nigerian media organization involved in the investigation.
More than 120 politicians and country leaders, in nearly 50 countries as well as hundreds of business people across the world were identified in the record as users of offshore entities.
According to records seeing by this newspaper and other ICIJ partners, Messrs Emefiele and Ovia, between 2007 and 2012, incorporated three offshore entities in tax havens, which were then used to acquire luxury jets and move funds around in cyclical manners that suggested tax avoidance schemes.
The shell companies are Vitesse Asset Management SA (incorporated in Switzerland in 2007); Oviation Asset Management Limited (a Bermuda company established in 2009); and Oviation Limited (an Isle of Man company incorporated in 2012).
Records show that in January 2013, the two bankers acquired a Gulfstream 450 for $33million and imported it into the Isle of Man, a European territory, where one of their shell companies - Oviation Limited - is domiciled. Oviation Limited then leased it to another of their companies, which in turn leased it to Zenith Bank.
Helped by Ernst and Young, a multinational professional services firm headquartered in London, Oviation Limited then registered for VAT in the Isle of Man, and used a deferment account to pay and demand refund of £4,239,178.13 VAT.
Messrs Emefiele and Ovia used a similar scheme when they acquired a $51million G550 jet in November 2015, and similarly ended up pocketing £6,652,988.36 in VAT refund.
Tax experts and journalists believe that the leasing schemes adopted for these transactions were structured to avoid tax - £10,892,166 in total - and that tax authorities should demand repayment of the amount.
They said Oviation Limited, not serving any genuine economic purpose, is not a real business and that the transactions it engaged in were artificial. The company does not have an office or fixed address, staff, telephone lines or computers in its Isle of Man location and is not known to offer any service. The company, the experts contend, therefore does not meet the fixed establishment test (HMRC VAT Notice 741A: place of supply of services).
The experts also explained that under EU and UK tax laws, the two jets imported by the bankers cannot be considered as qualifying aircraft, and that VAT cannot be refunded to private individuals, or exempt companies such as banks. Zenith Bank was an end user of the aircraft.
Emefiele, Ovia react
Responding to an enquiry sent to him by The Guardian UK on behalf of PREMIUM TIMES and other ICIJ partners, Mr. Emefiele explained why he and his partner adopted the suspicious leasing scheme in the acquisition of their aircraft
"During the relevant period, our client and other senior executives utilized aircraft for business purposes," the CBN governor said through London-based law firm, New Media LLP. "Our client understands that the leasing structures adopted were commonly and widely used in the aviation sector.
"Independent professional advice was sought at the relevant time, both on selection of appropriate aircraft register and, with respect to tax and importation issues, from Ernst & Young, a world leading audit and tax advisory service provider. Our client understands that all importations were carried out in accordance with that advice and the rules and laws applicable to the relevant jurisdictions at the time."
Mr. Ovia also rejected the allegation that he may have been involved in "aggressive tax avoidance" or "financial crime".
"Independent professional advice was taken from the international firm of Ernst & Young LLC with respect to all relevant tax issues," he told a Guardian UK journalist who contacted him on behalf of PREMIUM TIMES and other ICIJ team members working on the investigation.
We did nothing wrong
Ernst and Young also rejected allegations it facilitated tax avoidance schemes resulting in the creation of artificial leasing businesses.
"All our advice, whether in planning or compliance, is based on our knowledge of tax law and providing transparency to tax authorities," the company said. "Ernst and Young does not offer mass-market tax planning schemes.
"We support efforts to ensure that tax systems remain robust and relevant to today's ever changing business world.
"We support improving certainty in, and compliance with tax systems globally, and transparency in dealings with tax administrations. We will continue our work with international bodies and national governments in that direction."
Isle of Man launches enquiry
Even as Messrs Emefiele and Ovia as well as the other individuals caught in the web of the alleged tax avoidance scheme are pushing back, the Isle of Man Government announced on October 23 that it has invited Her Majesty Treasury to conduct an assessment of the practice for the importation of business jets into the EU through the Isle of Man, with a focus on the VAT treatment of aircraft leasing arrangements.
The government said it had to take that preemptive step following consistent and coordinated enquiries on the matter by media organisations associated with the ICIJ.
Chief Minister Howard Quayle MHK said, "We are taking a pre-emptive action to demonstrate that the Isle of Man is a well-regulated, open and transparent member of the international community. Consequently when such matters are raised with us or our integrity is challenged we will not be complacent.
"The VAT treatment of the importation of aircraft into the EU is a highly technical and complex area, in which the Isle of Man follows the same policy, laws and rules as the United Kingdom. We believe there is scope for the ICIJ to misunderstand the position.
"However, we take allegations of this nature extremely seriously and by announcing that an assessment has taken place we will demonstrate that the Isle of Man is prepared to take appropriate action.
"Officers from the department of economic development will be briefing members of the island's business community- we are proud of our diversifying economy and reserve the right to defend ourselves against any allegations that would damage the trust and credibility we have worked hard to build within the international community.
"I should also add that the internal review which started in October 2016 is aimed at testing the accuracy and efficacy of declarations made to it by those businesses."