Amaechi, Rivers’ IGR and collection costs

By Aaron Hart   |   24 August 2015   |   12:12 am  
Rotimi Ameachi

Rotimi Amaechi

PERHAPS one of the best kept secrets in recent times is the embarrassing fact that Rivers was one of the 19 states originally blacklisted by the West African Examinations Council (WAEC) over non-payment of examination fees for its students who sat for the May/June 2015 Senior Secondary Certificate Examinations.

Rivers exited that infamous list only in June, this year, after a new administration had taken over governance in the state. What is not a secret, though, is that Port Harcourt, the state capital, was a garbage city between January and May, this year, principally because the garbage collection company was being owed several months of unpaid claims.

Sports Council officials and pensioners were among many other groups to whom the Rivers State Government was heavily indebted.

Why would a state with huge internally generated revenue (IGR) and princely takings from the Federation Account be so broke, as to be unable to meet its most basic financial obligations? One can only hazard a guess, because the immediate past administration of Rotimi Amaechi provided no explanation.

Yet, nothing has been more illuminating than the claims and counterclaims contained in advocacy advertorials that have been published in some national dailies in the past fortnight or so.

One of the adverts was signed by The Integrity Group, with a Port Harcourt address, and has since petitioned President Muhammadu Buhari and the Economic and Financial Crimes Commission (EFCC) over allegations of impropriety by the Amaechi-led government in Rivers State.

The other advert was a defence mounted by the former Commissioner for Finance as well as the Secretary to the State Government, both of whom served under Amaechi. For those who are interested in reading the copious details of both adverts, these can be found in The Nation newspaper of August 13, 2015.

What caught my attention were the arguments for and against the appointment of a firm of consultants for the purposes of Rivers State IGR.

According to the published documents, none of which has been rebutted, the Rivers State Government under Amaechi entered into a Memorandum of Agreement with a firm of consultants to assist in IGR collection.

Even though there is in existence the Rivers State Internal Revenue Service, which was established by law, there is nothing to suggest that the Revenue Service was consulted before and during the negotiations that led to the Memorandum of Agreement with the firm of consultants.

The Rivers Revenue Service was simply faced with a fait accompli by the Agreement, which was signed on January 21, 2015, although it was backdated to take effect from January 1, 2015.

Before the Amaechi-led government entered into the Agreement with the consultants, the Rivers State Revenue Service was collecting an average of N7.5 billion as monthly IGR. By law, whatever the Revenue Service collects, it is entitled to keep five per cent thereof as administrative costs.

However, under the terms of the Agreement entered into with the consultants, the latter were to be paid 12 per cent commission or fees for IGR above N2.5 billion monthly.

Does anyone smell a rat? A statutory agency is already collecting about N7.5 billion monthly and keeping only five per cent as costs, yet a private firm of consultants has the bar considerably lowered for it, and then the quantum of its fees ballooned to 12 per cent.

I have a few lawyer friends who tell me that the law (that is, the courts) will not inquire into the adequacy of consideration in a contract, provided the contract is not tainted with fraud. In other words, if the parties agree that, for rendering such and such service, the service provider would be paid so much (maybe N1 or N1 billion), the law courts will not disturb the contract.

But where the contract reeks of fraud or deception, the law will intervene. In the Rivers example under Amaechi, the statutory Revenue Service was doing quite well.

If the reverse had been the case, it would be understandable why a firm of consultants had to be engaged, in order to boost the state’s IGR. But no.

The consultants were hired and given a much lower performance target, while being rewarded beyond what is reasonable in the eyes of any right-thinking person.

To restate the disturbing facts –the Rivers Revenue Service was collecting about N7.5 billion as monthly IGR and entitled to five per cent administrative costs; but the consultants were primed to receive 12 per cent as fees for monthly IGR above N2.5 billion.

If you are still not worried about the terms of Agreement, then consider how the state government paid the firm of consultants. On February 4 , 2015, that is, four days after the month of January ended, the consultants applied to be paid their commission, stating that the IGR for the month of January 2015 was N10.34 billion, out of which they demanded 12 per cent as fees.

Do not forget that the Memorandum of Agreement with the consultants was signed on January 21, 2015, effective January 1, 2015, and the Rivers Revenue Service was not a party to the negotiations.

If the statutory revenue agency was not aware of the negotiations with the consultants, until after the Agreement was signed, how could the firm of consultants have been engaged in revenue collection for the month of January – at least, before January 21?

The people of Rivers State were not aware that Amaechi’s government had set up a parallel revenue collection agency through the firm of consultants.

In other words, the Rivers Revenue Service could hardly testify to the work done by the consultants, before January 21. Yet, the consultants demanded to be paid 12 per cent of the January IGR.

The request for payment was dated February 4, and on February 17, Amaechi as Governor approved and directed the payment of N941,330,661.12 by way of fees to the consultants.

The Treasury complied with the Governor’s directive, and on February 23 issued a mandate for the release of the amount to the consultants.

A similar pattern followed a month later when on March 5 the consultants demanded their fees as 12 per cent of the IGR for the month of February 2015. The IGR for that month was N7.204 billion.

On March 12, Amaechi as Governor approved and directed the payment of N564,565,037.60 as fees to the consultants. As usual, the Treasury complied with the directive, and released the mandate for payment on March 24.

It is interesting that the Rivers State Revenue Service was not acquiescent to the dealings with the consultants. The Executive Chairman of the Revenue Service queried the rationale for the commission arrangement with the consultants.

The Executive Chairman also pointed out other anomalies, including that the consultants were only registered in the state as PAYE (Pay As You Earn) agents to the state on March 12, 2015, after the consultants had collected their first set of fees.

The Executive Chairman further wrote to the Commissioner of Finance under Amaechi, pointing out other curious facts about the firm of consultants: “Although their company profile states that they offer world-class consultancy services, they also claim that they only started operations in January 2015.

The company and its principal officers are not registered taxpayers in the state.” The then Finance Commissioner fired back: “I am dismayed to note that after our last meeting, where I painstakingly explained to you the rationale behind the engagement of the said consultants and despite the approval and express instructions from His Excellency, the Executive Governor, you have continued to raise reservations on the actions.”

The former Commissioner added: “If for any reason you have further grievances, I urge you to direct that to His Excellency, the Executive Governor.” Stakeholders must, therefore, demand answers from Amaechi over the high tax collection costs that were deliberately incurred through payments to a firm of tax consultants that offered no quality value over and above the state revenue agency’s performance. • Hart resides at Onne, Rivers State



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