Court Orders MTN to Pay $72.5m

The business operational methods of telecoms
giant, MTN Nigeria Communications Limited,
are again being brought topublic spotlight and scrutiny as the Lagos division ofthe Tax Appeal Tribunal has ordered the firm to pay the
sum of $72, 551, 059 millionin tax default to the Federal Inland Revenue Services (FIRS).

The non-payment is forthe period from 2007 to
2017 -10 years.

The tribunal, however,freed the firm from payingthe sum of $21,039,807 million, as penalties and interest on the principal sum.

It is not the first time MTNis perceived to have operated below the counter in Nigeria.

It would be recalledthat the Nigeria Communications Commissions (NCC),the nation’s telecoms regulator, had slammed a $5 billion fine on MTN for failing to disconnect subscriberswith unregistered phone lines bought before January 2012.

The flagrant violationcame when, in 2011, the
NCC mandated every telecoms operators in the land to register all existing phone dubscribers before January 2012 deadline.

The Commission also ordered that any unregistered phone lines at end of the
registration process, should be disconnected from operators’ networks.

However, for reasons bestknown to it. MTN refused/failed to comply with the directive, fueling speculations that the company’s action
allegedly aided the activities of terrorists, kidnappers and other enemies of the state
who used its nationwide services to organize their activities to commit heinous crimes against Nigerians and the country.

Though the matter was later resolved with the firm reportedly paying another figure to government coffers, the firm’s operational
methods left a sour taste in the mouth of many Nigerians.

Interestingly, MTN’s latest financial responsibility default in Nigeria is coming after it announced that it posted N359billion as profit
in 2022, the firm’s highest in five years.

On Friday, a five-man panel led by Professor A. B.Hamed, ordered MTN to payup on its tax indebtedness to FIRS.

Hamed gave the order while delivering judgment in an appeal numbered TAT/
LZ/VAT/075, filed by the telecommunication company against the request by the FIRS to pay the default. Other members of the
panel are: Barrister P. A. Olayemi; Barrister Babatunde Sobamowo; Barrister Samuel N. Ohwerhoye and Barrister Terzungwe Gbakighir.

The crux of the matter, according to the processes filed for the appeal, was that sometime about May 10, 2018, the Office of the
Attorney General of the Federation (OAGF) issued a report of its investigation into MTN’s Forms A and M transactions. The report covered 2007 to 2017 accounting years.

In a revised report dated August 20, 2018, the
AGF adjusted the alleged outstanding in respect of import duty and Value Added Tax (VAT) to the tune of N242.2 billion, (Form M-visible transactions) whilstthe section relating to VAT
and Withholding Tax (WHT) was revised to $1.284 billion (Form A –invisible transactions).

The processes also showed that sometime in
mid-2020, the FIRS informedMTN that it had received a report from the OAGF in respect of its alleged liability on VAT and WHT.

FIRS consequently conducted a review of MTN’s taxand accounting records and upheld the OAGF’s alleged tax liability findings. But MTN and its tax consultant, KPMG Advisory Services, held a series of meetings with FIRS to resolve the tax dispute arising from MTN’s alleged tax liability.

Thereafter, in July, 2021, FIRS issued a VAT assessment of $93, 590, 366 million, to
MTN.

This assessment comprised the sum of $72, 551,
059 million, as the principal liability and $21,039,807 million, for penalties and interest on the principal sum (first assessment).

However, MTN objected to the first assessment;
whereupon FIRS further reviewed the assessment. Accordingly, by a Notice
of Assessment dated April 14, 2022, the respondent issued a revised assessment for $US135,697,755 million to MTN as revised assessment.

Although the principal amount of tax alleged to be outstanding and due from the appellant in terms of principal tax liability in the revised assessment, i.e. $47, 776, 210 million, is less than
the alleged principal tax liability contained in the first assessment of $72,551,059 million, the interest and penalty imposed by FIRS on the alleged principal tax liability in the revised assessment of $87.900 million, was higher.