De-Taxed Diplomatic Centres in International Relations: Avoiding Recklessness in the Nigerian Case

Bola A. Akinterinwa 

Diplomatic centre or villages are generally established by various political capitals of the world in fulfilment of bilateral and multilateral diplomatic conventions. The main rationale is the requirement of International Law that the work of every accredited diplomatic mission in a receiving State be facilitated. Facilitation includes assistance in the acquisition of office building or land for building, absolute protection of diplomatic agents, non-violation of their persons, vehicles, residences, etc. And perhaps more significantly, based on the rule of equality of sovereignty, no sovereign State has the right to tax another sovereign State. 

As provided in Article 23 of the 1961 Vienna Convention on Diplomatic Relations, an accrediting state shall be exempt from payment of dues, taxes in the host country. Paragraph 1 of the Article stipulates that ‘the sending State and the Head of the Mission shall be exempt from all national, regional or municipal dues and taxes in respect of the premises of the mission, whether owned or leased, other than such as represent payment for specific services rendered.’ Additionally, Paragraph 2 says ‘the exemption from taxation referred to in this Article shall not apply to such dues and taxes payable under the law of the receiving State by persons contracting with the sending State or the Head of the Mission.’ The import of this Article 23 is the differentiation between what the Head of a Diplomatic Mission purchases that are not subject to taxation and the income or gains accruing to the business contractors with whom the business had been transacted and whose gains may be subject to municipal taxation. 

In the same vein, Article 34 provides that a diplomatic agent shall be exempted from all dues and taxes, personal or real, national, regional or municipal, but excepting indirect taxes, dues and taxes on private immovable property located in the host State, estate succession or inheritance duties, dues and taxes on private income having its sources in the host country, charges levied for specific services rendered, and also excepting ‘registration, court or record fees, mortgage dues and stamp duty with respect to immovable property, subject to the provisions of Article 23.’ It is useful to also note that Article 32 of the 1963 Vienna Convention on Consular Relations similarly exempts career Consuls-General, Vice Consuls-General, Consuls, Consular Premises and residences from taxation. It is against this diplomatico-consular background that inauguration of a Diplomatic Village should be appreciated. But before dealing with the question, what does the international practice look like?

International Diplomatic Villages

In making life comfortable for diplomatic missions accredited to a political capital of a receiving State, Diplomatic Academies, Centres, Villages, Houses are established and given different names and given different functional facilities. For instance, there are the Diplomatic Academy of Vienna, the Diplomatic Academy of Vietnam, Diplomatic Academy of London, Diplomatic Academy of South Africa, Diplomatic Academy of the Ministry of Foreign Affairs of Russia which is internationally adjudged as the oldest diplomatic academy in the world. Most of these academies provide a platform for seminars, academic exchanges, relaxation facilities which are open to registered members. Many of them train people on diplomatic practice.

Many of them are also economic in design and orientation. They are special shopping centres specifically reserved for diplomatic and consular agents. In France, for example, diplomatic agents can buy whatever is buyable without payment of tax in such diplomatic centres by simply identifying themselves. Unlike the diplomats, tourists and foreigners who do not intend to stay in Metropolitan France can still buy de-taxable goods in any shop. The only condition is that de-taxation only takes place at the time and point of exit of the country for shops that do not offer tax refund on the spot. Big shops like the FNAC des Champs-Elysée, des Halles and Ternes; Eurostar departure lounges in Gare du Nord and Or du Monde, etc. do have de-taxation services on the spot. However, some conditions must be met to qualify for tax refund.

The tourists must be residing outside of the European Union. They must not be less than sixteen years of age and must also be visiting France for a period of less than six months.

In shopping malls where provisions are specifically provided for diplomats and foreign travellers, it is really life made easy for them as there are many Parisian shops offering tax reclaim: Airvat Tax refund, Carrousel du Louvre, Westfield Forum des Halles, Village Suisse Paris, Or Du Monde, Aéroports de Paris shops, Vallée Village, Val d’Europe, Galeries Lafayette, the Printemps Haussman, Samaritaine Paris Pont-Neuf, etc. In all these shops, the Paris Official website of the Convention and Visitors Bureau says that ‘the purchase of a touristic nature, must be made over a maximum of three days, at a retailer that offers tax free shopping and in the same brand (or group of brands) for an amount exceeding €100 (since 1st January 2021), inclusive of tax. The retailer then tells the buyer what they must do in order to claim back the VAT and gives them the sales slip for export. The buyer must show their passport to the retailer in the shop to prove their non-resident status.’  

Another point about all the shops is that they are very specialised, they deal with different goods. Shops dealing with clothing surely have wares from various countries of the European Union as well as from outside of Europe. L’Habit Français, which is located in the 6th District of Paris, specialises in French dresses. It is a Made-in-France concept store. There are some that deal with different commodities: electronics, gift items, automobile, ICT, etc.

And perhaps most importantly, as further noted by the Paris Official website, all potential claimers of tax refund should ‘allow the necessary time for refund formalities to avoid stress on the day of departure The visitor must take the sales slip for export to complete these formalities at customs before checking in baggage and before the end of the third month following the date of purchase.’ Additionally, passengers who do not leave the European Union via France, and who travel via international rail can also claim the VAT back. All the details can be found on the dedicated page of the Ministry of France and Public Accounts.’

In Italy, a standard sales tax or VAT is called IVA (Imposta sul valore Aggiunto) and it is 22% of any taxable sales with current contemplation to increase it to 23% any moment from now. Unlike in France where a minimum purchase of €100 is required in order to qualify for refund, the minimum value of purchase to qualify for refund in Italy is €175 from any given shop. For refund, all buyers are to save the receipt of the goods purchased, prepare to show their return travel tickets back home, carry the items purchased without giving them to any third party, present themselves to Italy’s VAT refund stations, most of which are at the international airports and in the tourist points or travel hub. An official application form can then be filled for refund with the receipts of purchase. There are also the Planet Tax Free Refund Point, Leonardo da Vinci International Airport, Centro Servizi Caminiti, Global Blue Tax Refund Point, Tax Refund Fiumicino Airport, La Rinascente, etc. where tax refunds are possible.

It should be noted here that, apart from the standard sales tax of 22%, there is also the reduced 10% VAT rate applicable to real estate maintenance services and listed drug supplements, as well as the further reduced 4% VAT rate exclusively reserved for certain foods, drinks and agricultural products. 

Generally speaking, there is no standard procedure for tax refund in the European Union countries. What is normally required is the proof of residency, possession of the relevant papers of purchase, contacting the appropriate customs authorities and then requesting for refund. More importantly, it may be difficult for diplomatic agents to avoid payment of taxes because, be they standard, reduced or super-reduced VAT simply because ‘what you see on the price tag is what you pay. The value-added tax is systematically included in the price. There are a few companies that try to scam travellers making online purchases and only include the VAT at the payment stage.’ This is said to be common when buying a cheap flight ticket. Additionally, it is generally considered in the EU countries that exports are exempt from VAT. Consequently, when goods are purchased in Europe and taken out of the region, they are regarded as exports, meaning that all purchasers of goods are eligible to ask for tax refund when they want to travel out of the EU. Generally noteworthy as well, there is no tax refund for consumer services provided in hotels or restaurants. 

In the United States, the Federal Government does not refund sales tax to foreign visitors as sales tax charged in the US are paid to individual States. Consequently, it is the taxation authority in the very state where purchases are made that should be contacted for tax refund. In this case, the conditions of refund vary from one State to another. While for instance, the JFK airport and the New York State do not provide sales tax refunds, the State of Texas and some areas within Louisiana do provide tax refunds to international shoppers. Interestingly, Government’s Tourist Refund Scheme has been ‘designed primarily for travellers taking items back to their overseas homes or for locals taking purchases on a one-way trip, such as gifts for overseas family and friends. 

In New York, there is the Diplomatic Duty Free Shops, which is considered as a reflection of Manhattan’s distinctive spirit as the greatest city on earth. The shop is also the only travel retail boutique located at the forefront of retail in Midtown Manhattan. In fact, a Diplomatic Duty Free Shops of New York Catalogue for 2022-2023 has been published. The catalogue serves as a guide to all diplomatic agents, especially those accredited to the United Nations. All the shops with facilities for non-taxable goods for the diplomatic community also serve the purposes of the non-diplomatic and consular staff. The basic difference is that the diplomats are not made to pay any tax while all other customers have to pay. 

Nigerian Case and its Environment

From the foregoing, it can be noticed that there is no special village built like the Nigerian model. What generally obtains elsewhere is that several business outfits are authorised to sell goods and refund taxes to those eligible for refund, including diplomatic agents. As also noted earlier, the shops deal with specialised items and they are generally located within an agglomeration of other businesses. In this case, Nigeria’s quest to implement the Vienna Convention on Diplomatic Relations by building a village for the diplomatic community in Nigeria cannot but be quite interesting, especially because of the environmental conditionings.

The diplomatic village is built on a 2,700 square metre land along the Olusegun Obasanjo Way, in the Central Business District of Abuja. It has a top-notch shopping centre, recreational services, spa with 12 treatment rooms, clinics for eye and dental care, restaurants, gym, liquid hub, visual art gallery, etc. It is designed to be a one-stop shopping village. In terms of aesthetic look from a distance, the village is good and presentable. We cannot comment meanwhile on the interior until we have the opportunity to pay a visit to the village. Thus, many issues cannot but be raised in the evaluation of the extent to which Nigeria’s foreign policy can be well or better protected as a result of the existence of the diplomatic village.

First is the name of the diplomatic centre. It is called a Diplomatic Village because there is a service provision for the diplomatic community. Accommodating the diplomats in the village cannot be good enough a reason for the name. Considering that Africa is both the cornerstone and centrepiece of Nigeria’s foreign policy, it would have been more decent to qualify the village with ‘Africa’ so as to read African Diplomatic Centre. The way the whole world is described as Global Village, Abuja ought to play host to Africa as an Africa Village. The world is considered as a global village because of globalisation, technological connectivity, efforts at integration of global economies, etc. In the same vein, the Diplomatic Village ought to be the villa cognita of whatever Africa represents in food and dress diplomacy, commercial goods, manufactured goods, clinical services, recreational facilities, liquid or wine hub, etc.

Put differently, in an African Diplomatic Village in Nigeria (ADVN), every Member State of the African Union should be given a plot of land to develop as their own house where to promote their national personality in various ramifications. For Nigeria, all the 36 constitutive States of Nigeria should similarly be given a plot of land for self-projection in the village. It is by so doing that Nigeria’s foreign policy concentricism and beneficial and constructive concentricism policy, as propounded by Professor Ibrahim Agboola Gambari and Ambassador Oluyemi Adeniji respectively, can be given an empirical meaning. Without scintilla of doubt, the idea of a diplomatic village, of which we have been talking about for a long time, is quite commendable, not because one has been built but because President Muhammadu Buhari can now lay a legitimate claim to having contributed to the completion of the project begun in 2010. 

PMB’s foreign policy lacks lustre. It has no focus and only reacts to global developments. Besides, it is unnecessarily dependency-oriented and administered. It is hardly conducted to project Nigeria as a natural giant. In fact, Nigeria is one exceptional country where people have sustained the greatness of Nigeria before their retirement but cannot assist Government because of incapacitation, even in their life of retirement. An association like the Association of Retired Career Ambassadors of Nigeria (ARCAN) cannot keep quiet when it is visibly clear that Nigeria does not have a foreign policy focus? Is there any goodness in the existence of the ARCAN if it cannot operate in the mania of a Council on Foreign Relations?

The Federal Government is reported to be preparing to open a diplomatic village in Maiduguri in Borno State and in Lagos State because of the large size of the diplomatic communities in both States. There is little problem with the expansion of the village, except that it only has the potential to open new windows of institutional corruption and more widely. Diplomatic Villages in other parts of Nigeria can complement and be more of economic productivity.

In the eyes of the PMB administration, the Diplomatic Village would improve diplomatic ties between Nigeria and the Diplomatic Corps, as well as reduce loss in revenue to Nigeria. As explained by Mr. Uche Udozor, the Managing Director of the Diplomatic Village, ‘before now, diplomats brought their consumables to the country, which had been abused, and that drew the attention of the Government.’ More important, there will be more stringent measures on importation by diplomats because they bring in products in commercial quantities, asking for waivers.’ 

This expectation can be likely but most embassies of the big powers are self-reliant and therefore often prefer to be inward-looking. Diplomatic interactions and services in the village are likely to be characterised by caution and suspicion. How will the Russian and Ukrainian relate if they meet in the village? Will the US Ambassador and the Ambassador of The Gambia, or those of France and Mali relate within the framework of the diplomatic village?

Apart from the name of the diplomatic centre and nature of relationships, there is the aspect of insecurity and diplomatic protection. Attacks on diplomatic agents are largely induced by the fact of the obligation of host states to ensure their inviolability. Terrorists consciously target them in order to score some points of protest. This was the genesis of the letter and parcel bombs on American, British and French ambassadors at the initial stage of Islamic fundamentalism and the Palestinian struggle for a homeland as promised in 1917 by William Balfour. Now that a diplomatic village will provide a common platform for many diplomats to be there, this necessarily presents a special security challenge that must not be taken with a kid’s glove.

The mania of political governance in Nigeria is one in which the rule of law is respected selectively. Agree or disagree, there is no disputing the fact that Nigeria is fantastically corrupt. Professor J.S. Cookey, traced, in his 1987 Report of the Political Bureau, the origin of corruption and indiscipline, which was described as the bane of the Nigerian society, to 1967. From 1967 to 2023, Government has been trying to tame corruption but to no avail. The more the efforts at fighting it, the more scientific institutional corruption becomes in a new style. The current New Naira crisis and the refusal of the PMB administration to comply with the judgment of the Supreme Court on the subject-matter clearly point to how democracy is practised in Nigeria. In this regard, how will the Diplomatic Village be managed? Is it the Nigerian way or in the mania of international standard? It cannot be very assuring to say that the diplomatic police are on ground to secure the village. What will be more convincing is visible strengthening of the diplomatic police, ensuring a 24/7 presence and having a water-tight control of access to and from the village. Mr Odozor already admitted that the village has water-tight security and that ‘as from the entrance down into this place is very well secured. The special squadron from 44 Unit, which is the diplomat mobile police unit is stationed here in a very large number… The Government has done the needful security wise and we are happy.’ This is commendable but lessons should be learnt from the Kenyan experience and from attacks on diplomatic missions where security can be said to be more than water-tight.

The Diplomatic Village in Abuja is a private investment initiated by Mr. Uche Odozor, but ‘Government got involved because all the countries that adopted the Vienna Convention operate the tax-free shop. This is what diplomats from Nigeria enjoy and we need to comply and reciprocate.’ This way of explaining the rationale for Government’s involvement is most unfortunate. If Nigeria had not had a diplomatic village before now, it is simply because Nigeria is not faithful to her foreign policy objective of respecting International Law and Treaty Obligations as contained in Article 19(d) of the 1999 Constitution as amended. Countries that have diplomatic shops promptly did so in compliance with the Vienna Convention and not necessarily to please Nigeria. Consequently, the argument of reciprocal treatment is not the issue. Besides, some state governments invested in the Diplomatic Village project in 2011. What is the future of this partnership in light of how public institutions are poorly managed in Nigeria? More important, the environmental diplomatic conditioning in Nigeria is such that diplomacy is now increasingly being bastardised with the CBN Governor being invited to address the Diplomatic Corps. As much as there is goodness in educating the diplomatic community on the Naira Crisis, the CBN Governor, Godwin Emefiele and the HMFA do not need to explain the crisis but to communicate Government’s policy by a Note-Verbale. Godwin Emefiele’s direct briefing has the potential to belittle the Foreign Ministry and strengthen diplomatic bypassing of the Foreign Ministry in the foreseeable future.