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Electricity Regulation in Nigeria. Section 74, Electric Power Sector Reform Act, 2005.

Under the Electric Power Sector Reform Act, 2005 (EPSRA), the Nigerian Electricity Regulation Commission (NERC) may of its own volition or upon receipt of a complaint enquire into the conduct or functioning of any licensee’s obligations under the Act, rules or regulations, codes of conduct, or terms and conditions of the licence.

According to this attached Notice, NERC claims to have ‘reasonable cause’ that the listed Electricity Distribution Companies (DISCOs) have breached the provisions of EPSRA, terms and conditions of each DISCOs’ licences, the 2018 Minor Review of Multi Year Tariff Order, and the Minimum Review Remittance Order for 2019.

These DISCOs have been given 60 days to show cause why their licences should not be cancelled.

Without prejudice to NERC’s statutory powers to regulate and take tough decisions, and without delving into the merit or otherwise of this regulatory move, it is our humble view that this path is one fraught with many dangers for the distribution of electricity, with its consequential impact on the consumers of electricity – both domestic and industrial.

For one, has NERC covered all bases in terms of managing possible fall out – technical and LEGAL – from this threatened cancellation? For another, if the purpose of this is to get the attention of these DISCOs, what message might this be sending to potential investors in this economy?

How long, would this possibly drag on for; and while it is on-going, how might the DISCOs perform vis-a-vis consumers of electricity?

This we believe are urgent issues that must be on the mind of NERC. We hope they have really thought this through? Our recent history suggests not.

Interesting times ahead!

Wisdom Nuggets 101_Digital Disruption.

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Business is no longer being done in the ways taught in business schools or passed down in organizations through training. Business models are becoming dated in the face of nimble and agile organizations; due mainly in part to what is described as Digital Disruptions.
 
Ask metered taxis, the effect that the UBER App has had on their business. The effect of digital disruption is that entrepreneurial start-ups reaching the $1billion evaluation milestone quicker than before; and the average lifespan of S & P 500 companies has shrunk by almost two-thirds in the last 50 years?
 
Implication for you and your business is simple … innovate, digitize or fizzle out. As Digital Disruption is happening across industries, are you really willing to take that risk?
 
© 14th November 2016. Adewale Adeniji/LexConsults Humanae International.

Economy_Apple Has to Pay up to $14 Billion in Back Taxes Plus Interest (AAPL)

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The European Commission has ruled that Apple Inc. (AAPL) received unfair tax benefits from Ireland and will have to repay 13 billion euros or $14.5 billion in back taxes, plus interest.

After a three year investigation into the matter the European regulator has said that two tax rulings, one in 1991 and the other in 2007, issued to Apple by Ireland “substantially and artificially” lowered the tax the company had to pay since 1991. In a statement released this morning Commissioner Margrethe Vestager said, “Member States cannot give tax benefits to selected companies – this is illegal under EU state aid rules. The Commission’s investigation concluded that Ireland granted illegal tax benefits to Apple, which enabled it to pay substantially less tax than other businesses over many years. In fact, this selective treatment allowed Apple to pay an effective corporate tax rate of 1 per cent on its European profits in 2003 down to 0.005 per cent in 2014.” The back tax which will have to be collected by Ireland from Apple is for the years 2003 to 2014. In 2015 Apple changed its company structure in Ireland. (See also, Apple CEO Tim Cook Sells $36 Million in Company Stock )

Apple was recording all sales in Europe in Ireland instead of individual nations, foregoing those nation’s own tax policies. The company was able to accomplish this by establishing two subsidiaries in Ireland, Apple Sales International and Apple Operations Europe, which held the rights to sell and manufacture Apple products. These subsidiaries then made payments of more than $2 billion a year to Apple Inc. in the U.S. and this amount was deducted from its recorded profits. Most importantly the two tax rulings in question allowed Apple Sales International to split its profits, allocating most to a “head office,” where it remained untaxed, and the rest to its Irish branch. In 2011, Apple Sales International recorded a profit of $22 billion but only 50 million Euros were taxed in Ireland.

Apple and Irish authorities are expected to appeal this ruling. Ireland’s Finance Minister Michael Noonan said, “The decision leaves me with no choice but to seek cabinet approval to appeal. This is necessary to defend the integrity of our tax system; to provide tax certainty to business; and to challenge the encroachment of EU state aid rules into the sovereign member state competence of taxation.”

Apple, the most cash-rich company in the U.S., was questioned by the U.S. Senate subcommittee about its offshore cash in 2013. Apple CEO Tim Cook has maintained that it’s simply too expensive for his company to bring money earned abroad back to the U.S. under the current tax laws.(See also, Apple CEO Tim Cook on Tax Repatriation ).