Does Nigerian businessman and industrialist Aliko Dangote pay his fair share of taxes in Nigeria, or is he hiding assets abroad?
There are several secret shell companies linked to Africa’s richest man, his allies and his relatives, according to leaked data of Panama-based offshore legal services provider Mossack Fonseca.
The leaked data was sent to the German newspaper Süddeutsche Zeitung and shared by the International Consortium of Investigative Journalists.
Dangote, his half-brother and his business allies have over the years used shell companies domiciled in controversial tax havens in their business transactions.
The Panama Papers investigation unveiled the cloak of secrecy provided by Mossack Fonseca, a Panamanian law firm that specializes in creating offshore companies.
Mossack Fonseca said it has done nothing wrong, merely helping incorporate companies and that before agreeing to work with a client, it conducts a thorough due diligence process, “one that in every case meets and quite often exceeds all relevant local rules, regulations and standards to which we and others are bound.”
Dangote is one of its most prominent clients. In Panama alone, based on company registration addresses provided by shareholders, 13 shell companies registered by the firm are directly linked to people and companies who in turn are linked to Dangote and his allies.
Dangote and his his half-brother, Sayyu Dantata, have allegedly used their multiple companies in Nigeria and other countries to secure huge loans. For instance, in 2010, the management of Bank PHB, a Nigerian bank, took Dandata’s MRS Holdings to court over the non-payment of a $58-million loan the bank had granted it to purchase Chevron Texaco in 2008.
In September 2014, Sani Dangote, Dangote’s younger brother, was dragged before the federal high court in Lagos. In its suit, Union Bank alleged that in a bid to evade repaying his 5-billion naira loan, Sani Dangote tried to deplete the funds in his accounts by diverting them to Dubai, Canada and Switzerland.
Shell companies are usually domiciled in tax havens such as the Cayman Islands, Monaco, Panama, Samoa, Switzerland, Luxembourg, Hong Kong, Singapore, Lebanon, Mauritius, the British Virgin Islands, St Lucia, Belize, Macao and close to 100 other, usually tiny, countries.
Shell companies, experts say, are entities that have no active business and usually exist only in name as vehicles for another company’s business operations. In essence, they are corporations that exist mainly on paper, have no physical presence, employ no one and produce nothing. They are frequently used to shield the identities of their owners and/or to hide money.
Owners create shell companies for a host of reasons. Some people own shell companies so that when they acquire assets such as private jets and real estate, governments do not find out and demand tax. Others set up shell companies to raise funds before starting operations, to attempt a takeover or, some times, as a front for an illegal business.
The reasons why Dangote and his allies set up secret companies are not clear. But shell companies are not illegal, and not all owners use them to dodge paying tax or to hide assets. However, they are at times used for tax avoidance.
They do this through transfer pricing, a complex structure that allows businesses (often in developing countries) to shift profits to shell companies overseas to allow them to pay little or no tax in the country where they made the money. The leaked documents offer evidence that Mossack Fonseca offers clients aggressive “re-invoicing” services that are designed to help companies evade paying taxes.
It remains unclear whether Dangote and his associates used their shell companies to procure any such service from Mossack Fonseca.
Reported by Joshua Olufemi and Emmanuel Mayah