The Senate on Wednesday resolved to quickly amend the Production Sharing Contract (PSC) Act in order to end the years of oil revenue loss to the Federal Government. The bill to amend the Act will be presented in plenary today (Thursday).
The resolution follows several failed efforts by the 8th Senate to review the Act through private members and government-sponsored bills.
PSC is a contractual arrangement for petroleum exploration and production whereby the Federal Government as owner of petroleum resources engages a contractor to provide technical and financial services for an agreed share in profit oil after payments of royalty, coat and tax oil.
The FG had offered the PSC in 1991 through a legislation which was codified as “Deep Offshore and Inland Basin Production Sharing Contract Act 2004” and it became effective on January 1, 1993.
Since then, the PSC Act has not been reviewed and the situation has resulted in loss of oil revenue by the Federal Government. The Senate resolved to investigate the sum of N7 trillion oil revenue lost by the Federal Government over a period of 20 years due to non-review of the PSC Act.
Specifically, the Senate noted that Section 16 of the PSC Act provides that where the price of crude oil exceeds US$20 per barrel, the Act should be reviewed to ensure that the share of the Federal Government on additional revenue is adjusted to the extent that the contractual agreement shall be economically beneficial to the government.
If the amendment of the Act finally succeeds, Nigeria stands to gain additional N360 billion annually and also, it will boost oil revenue generation significantly.
Consequently, the Senate has mandated its committee on petroleum resources upstream to uncover the reasons for the failure to review the PSC Act.
Also, it further charged the committee to recover all arrears of oil revenues to the Federal Government and the states entitled to derivation covering the years the PSC Act was not reviewed.
The Senate’s decision followed a motion by Ifeanyi Uba (Anambra South) on the urgent need to recover additional revenue accruable to government of Nigeria from the PSCs pursuant to Section 16 of the Deep Offshore And Inland Basin Production Sharing Contract Act CAP D3 LFN 2004.
Leading the debate, Uba argued that the principal role of the National Assembly is to amend subsisting laws.
“The need to probe the loss of oil revenue and non-review of the PSC Act is imperative to ensure that beyond the crude oil price of US$20, the share of the Federal Government in the additional revenue is adjusted,” he said.
Senators in their individual contributions unanimously condemned why the Federal Government was allowed to be cheated in contractual agreements and lose heavy oil revenue.
They assured that lawmakers would not bend till the Act is amended.
In his remarks, Senate President Ahmad Lawan commended the timeliness of the motion and said the bill would be enacted and given expeditious treatment.
“Once the bill is reviewed, apart from boosting oil revenue, it will provide the N120 billion the Federal Government is looking for to fund the 2020 budget,” Lawan said.
Meanwhile, a bill to enact legislative action to impose tax on communication services was on Wednesday presented in Senate for first reading.
Tagged “Communication Service Tax Bill, 2019”, it is being sponsored by former Senate Leader Ali Ndume.
The Bill stipulates that tax shall be levied on electronic communication services like voice calls, SMS, MMS, data usage both from telecommunication services providers and internet service as well as pay per view TV stations.
Ndume, while fielding questions from journalists after the bill was presented for the first time, explained that it will enhance distribution of wealth where ordinary Nigerians would benefit.
According to Ndume, it is unhealthy to increase VAT because it will greatly affect the economy by astronomically jacking up prices of goods and services.
A copy of the Bill sighted by journalists reads that “there shall be imposed, charged payable and collected a monthly Communication Service Tax to be levied on charges payable by a user of an Electronic Communication Service other than private Electronic Communication Services”.
“The tax shall be levied on Electronic Communication Services supplied by Service Providers,” it reads.
“For the purpose of this clause, the supply of any form of recharges shall be considered as a charge for usage of Electronic Communication Service.
“The tax shall be paid together with the Electronic Communication Service charge payable to the service provider by the consumer of the service.
“The tax is due and payable on any supply of Electronic Communication Service within the time period specified under sub-clause (5) of whether or not the person making the supply is permitted or authorised provide Electronic Communication Services.
“The Federal Inland Revenue Service (FIRS) established under section 1 of the Federal Inland Revenue Service (Establishment) Act, 2007 shall be responsible for collection and remittance of tax, any interest and penalty paid under this Bill.
“The FIRS shall pay the tax collected together with any interest and penalty into the Federation Account,” it further reads.
The bill further states that all service providers shall file a tax return to account for the tax.
“The tax return shall be in a form prescribed by the FIRS and shall state the amount of tax payable for the period and any related matters that may be required.
“The return and the tax due to the accounting period to which the tax return relates shall be submitted and paid to the FIRS not later than the last working day of the month immediately after the month to which the tax return and payment relates.
“The FIRS may extend the period within which the tax return may be submitted and payment made on application in writing by a service provider, where good cause is shown by the applicant.
“The extension shall be communicated to the applicant in writing and shall state the circumstances under which the tax return shall be submitted for the particular period.”
“A service provider who without justification fails to submit to the FIRS the tax return by the date is liable to a pecuniary penalty of N50, 000.00 and a further penalty of Nl0, 000.00 for each day the return is not submitted,” it states.