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MTN, FIRS in unending legal battle over tax liability

MTN, FIRS in unending legal battle over fine

MTN Nigeria has said it would appeal the judgment of the Lagos state division of Tax Appeal Tribunal (TAT) ordering the telecom operator to pay the sum of $72,551,059 (N57.23 billion), in tax default to the Federal Inland Revenue Services (FIRS).

The judgment which was delivered on Wednesday 25 October 2023 covers 2007 to 2017. The tribunal, however, absolved the telecom operator from paying the sum of $21,039,807, as penalties and interest on the principal sum.

In a filing MTN made to Nigerian Exchange (NGX) on Monday, the telco showed that the latest fine was a significant reduction from the amount the company was slammed by the Attorney General of Nigeria, underscoring MTN’s insistence that it had been innocent all along.

“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,” said Tobechukwu Okigbo, Chief Corporate Services and Sustainability Officer of MTN.

In 2018, the Attorney General of the Federation (AGF) and Minister of Justice issued a $2 billion tax bill relating to among other things, import duties, VAT, and withholding taxes on imports and payments, which MTN rejected saying it had cleared all amounts owing under the taxes in question.

The AGF withdrew from the case in 2020 and transferred the Form A-related transactions valued at $1.3 billion to the FIRS and the balance to the Nigerian Customs Service (NCS) to resolve the contentious issues.

Read also: MTN data revenue surge by 36% on increased smartphone usage – Report

According to MTN, a series of engagements with the FIRS led to an initial assessment and 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. The telco said it had by a letter of objection dated May 13, 2022, objected to this assessment which led to a revised total assessment of $135 million, representing a principal tax liability of $47 million and interest and penalty of $87.9 million. The FIRS had replied by a letter dated June 16, with reference number FIRS.TID.LOS/2020/0213/01. It informed MTN of its refusal to amend the revised assessment.

In a bid to clarify the interpretation of the VAT Act’s provisions concerning the tax treatment of the transaction that led to the previous assessments, MTN filed for an appeal at 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 licencing and upgrade,” the MTN filing noted.

The company is now moving to appeal the latest decision of the court.

“Disputes like this and how they are resolved, help build and strengthen the system, which makes it imperative for broader push for fiscal policy reforms which will improve affordability for consumers and incentivize investments by operators,” Okigbo said.