In a protracted legal saga, MTN Nigeria has announced its intent to appeal the judgment handed down by the Lagos State Division of Tax Appeal Tribunal (TAT), ordering the telecommunications operator to pay a staggering sum of $72,551,059 (N57.23 billion) in back taxes to the Federal Inland Revenue Service (FIRS). The judgment, which was delivered on October 25, 2023, pertains to the period from 2007 to 2017. However, it’s worth noting that the tribunal spared the telecom operator from paying an additional $21,039,807 in penalties and interest on the principal sum.
In a filing with the Nigerian Exchange (NGX) on Monday, MTN emphasized that the recent fine represents a substantial reduction from the initial demand made by the Attorney General of Nigeria, underscoring MTN’s unwavering assertion of its innocence.
Tobechukwu Okigbo, Chief Corporate Services and Sustainability Officer of MTN, stated, “It is important to note that MTN’s argument has always been that we will follow established processes in this and any other tax dispute. Our robust challenge of the AG’s demand at the time was premised on tax issues being outside his remit.”
This legal battle traces back to 2018 when the Attorney General of the Federation and Minister of Justice issued a $2 billion tax bill encompassing import duties, VAT, and withholding taxes on imports and payments, which MTN vehemently rejected, claiming it had settled all amounts related to the contested taxes.
Subsequently, the AGF withdrew from the case in 2020, dividing the Form A-related transactions, valued at $1.3 billion, between the FIRS and the Nigerian Customs Service (NCS) to address the contentious issues.
MTN revealed that a series of discussions with the FIRS resulted in an initial assessment and a reduction of the fine to $93.6 million, comprising $72.6 million as principal liabilities and $21 million for penalties and interest on the principal amount. MTN’s objection to this assessment, expressed in a letter dated May 13, 2022, led to a revised total assessment of $135 million, with a principal tax liability of $47 million and interest and penalties amounting to $87.9 million. The FIRS responded with a letter dated June 16, refusing to amend the revised assessment.
To clarify the interpretation of the VAT Act’s provisions concerning the tax treatment of the transactions that underlie these assessments, MTN has now filed an appeal with the TAT.
“The transactions in question primarily involve the alleged VAT payable on offshore training services provided to employees of the company, transponder services provided by a non-resident company, and software licensing and upgrades,” MTN’s filing explained.
As this legal battle persists, MTN is poised to appeal the latest court decision, highlighting the broader significance of such disputes and their resolutions in shaping and fortifying the fiscal system. MTN’s stance underscores the urgent need for comprehensive fiscal policy reforms aimed at enhancing consumer affordability and incentivizing investments by industry operators.
