General Electric will refund Arco Petrochemicals Engineering Company Limited an excess of $2 million withholding tax illegally deducted during a business engagement between both parties.
The agreement to refund this money was reached during a joint negotiation between FIRS officials, General Electric, ARCO and the Trade Union Services Department of the Federal Ministry of Labour and Employment in Abuja.
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The details: General Electric contracted Arco Petrochemicals to supply personnel for an engagement. After the engagement, the workers did not get all their entitlements because General Electric deducted 10% withholding tax for the contract that held between 2006 and 2015.
Illegitimate deduction: The deduction of 10% withholding tax is against the 5% tax rate stipulated by Nigerian law, according to Arco in one of its letters dated June 5, 2018. Arco argued that the stipulated tax rate should be 5% in line with the FIRS Circular No. 2006/02, dated February 2006.
As a result of this, 60% of each worker’s entitlement has been left unpaid since 2009. This dire situation forced the Federal Government to intervene through its Ministry of Labour and Employment after Arco admitted its failure in paying salaries and settling Union dues.
“The ministry is not a debt collection agency, it came into the matter because ARCO accepted its financial obligation for the settlement of salaries and union dues, the company said the only way it could complete the payment is if GE made a refund to it.
“We gave them three weeks to begin the process of refund for those monies that they have an understanding that they were actually over-payment to FIRS. If there is no contention on that, within one week, GE should initiate the process of refund,” an official from the Ministry of Labour and Employment said.
Branch Chairman, ARCO Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN), Amadike Ikechukwu, disclosed that only field workers were paid 100% of their entitlement while 40% was paid to other categories of staff when their employments were terminated.
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He explained that ARCO could not complete the payment because the American company, General Electric, deducted 10% withholding tax from workers earnings and paid the sum, which runs into millions of dollars, to FIRS. He was, however, optimistic of a turnaround in the situation.
“As union leaders, we agree with the commitment made by FIRS and GE. We are optimistic that the remaining 60% will be paid to the workers,” he said.