CBN Gov Emefiele And Zenith Bank’s Chairman Jim Ovia In Tax Avoidance Scandal

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.

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”.

In the meantime, the Formula One world champion, Lewis Hamilton, one of the world’s richest sports people, avoided paying European taxes on his private jet using an Isle of Man scheme that is to be investigated by HM Revenue and Customs.
The big four accountancy firm EY and Appleby, the law firm at the centre of the Paradise Papers leak, helped Hamilton and dozens of other clients set up seemingly artificial leasing businesses through which they rented their own jets from themselves.

Two law professors who reviewed the scheme described it as potentially “abusive”, saying it doesn’t appear to follow European rules. “No one seems to be enforcing the laws that exist,” said Rita de la Feria, chair of tax law at the University of Leeds.

After being challenged by the Guardian, the Isle of Man government has called in the British tax office, which will this month begin a review of 231 tax refunds issued to private jet owners since 2011, in a $1bn VAT giveaway.
Hamilton said he had instructed a senior lawyer to check his arrangements and was told they were lawful. He said his practice was to rely on professional advice, and he was not concerned with day-to-day management of his business.

Legitimate tax avoidance schemes are not illegal. There is no suggestion Hamilton was directly involved in creating the scheme used for his jet. He sought professional advice and followed it.

What experts say, however, is that the scheme created appears to be so artificial that it is open to challenge, that it allowed Hamilton to avoid tax that would otherwise have been due, and that the Manx government did not take the proper steps to collect the VAT owed.

Hamilton appears to have used shell companies in the British Virgin Islands (BVI), the Isle of Man and Guernsey to avoid the entire £3.3m VAT bill triggered when he imported his £16.5m red Bombardier aircraft into England from Canada in 2013. Hamilton set up another Isle of Man company to purchase a €1.7m motorhome that he uses at racetracks. No VAT appears to have been paid on that purchase either. Hamilton denies using shell companies, and says the Manx entities were part of his businesses.

The British racing driver, born and raised in Stevenage, takes numerous steps to shelter his £130m fortune. He is contracted to Mercedes, with whom he secured his fourth world championship last month, via a Guernsey company. He holds a Malta company for image rights, and has lived as a tax exile since 2007, first in Switzerland and now in Monaco.

Files leaked from Appleby suggest as much as £1.1m of the VAT he appears to have reclaimed on his jet should have been paid, along with hundreds of thousands due on the continuing costs of flying the jet.

The Paradise Papers data was obtained by the German newspaper Süddeutsche Zeitung and shared by the International Consortium of Investigative Journalists in Washington with more than 90 media partners including the Guardian, the New York Times and the BBC.

It shows how Isle of Man customs hosted a private meeting with an EY adviser during which details of the structure were discussed, and agreed to fast-track the paperwork.

Premium with additional report from Guardian