THE MULTICHOICE v. FIRS SAGA: The Story As It Is…

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Earlier this year, the Federal Inland Revenue Service (FIRS) declared that Multichoice Nigeria Limited (MCN) and its parent company; Multichoice Africa had defaulted in their tax obligations over the years and thus asked commercial banks, who are agents to the companies to freeze and recover 1.8 trillion naira from the accounts of the company. This was confirmed in a statement issued by Mr Abdullahi Ahmad, Director, Communications and Liaison Department of FIRS in Abuja in July 2021.

 

The FIRS relied on the provisions of section 49 of the Companies Income Tax Act 2004 (as amended), Section 31 of the FIRS (Establishment) Act No.13 of 2007, and Section 41 of the Value Added Tax Act 2004 (as amended) to appoint all bankers to Multichoice Nigeria and its parent company as a collecting agent till they fully recover the aforementioned tax debt. This decision came as a result of the group’s under-remittance of taxes, failure to give accurate information on the number of its subscribers and income, and its continued refusal to grant FIRS access to its servers for audit.

On the part of the FIRS, they are frustrated by the level of non-compliance especially by foreign companies (as in the case of Multichoice companies) to tax obligations and payment, despite making huge profits, they still engage in tax evasion. According to the FIRS, Nigeria contributes 34% of Multichoice group total revenue in Africa.

On the other hand, Multichoice Nigeria through its spokesperson, Carol Oghuma explained that the company has not received any notification from the Federal Inland Revenue Services, and that the company respects and is comfortable that it complies with Nigerian tax laws. The company also said they are trying to reach a settlement with the FIRS. As told by the company, FIRS alleged that they have over 20 million subscribers’ base, which they must pay tax based on, while the total subscribers’ base of the company is not up to that in Africa.

The company said their tax remittance is quite straightforward, as Multichoice’s subscribers value added tax are paid directly to the agency and that the agency

 

(FIRS) instructs their outlets (franchised private firms) to allow FIRS access to their books is impossible. The company said this is because they can only advise but not instruct a private firm to open its books so that FIRS could confirm if it is paying taxes or not.

 

When the tussle got to the Tax Appeal Tribunal (TAT), Multi-choice was ordered to pay 50% of the disputed sum, which is 900 billion naira to FIRS and 10% of the said deposit as a condition precedent for the further hearing of the appeal. Multichoice reacted that they are not compelled to pay half of the disputed sum as that is not the proper interpretation of paragraph 15(7c) of the fifth schedule to the FIRS Act, 2007. Multichoice rather contended that by the provision they are only to pay 50% of tax paid the previous year with 10% as mark-up for security for further prosecution of the appeal.

Flowing from above, Multichoice companies have their origin from South Africa. It must be put in mind that this is not the first instance the Nigerian government has been trying to penalize a South African company over tax evasion. In 2018, MTN battled over 2 million dollars evasion claim with Nigeria. Also, the Central Bank of Nigeria accused MTN for failing to remit over 8.1 million dollars in dividends. While the FIRS failed to make public these issues till this moment is a matter of concern. Who is right and who is wrong? Your guess is as good as mine.

 

ABOUT THE AUTHOR:

Abdul Pelumi Ganiyu, a penultimate student of Faculty of Law, University of Ilorin. He is an avid writer and doubles as both the Ass. General Secretary and Deputy Editor –in-Chief of the Tax Club, Editorial Board.  He has a keen interest and strives to contribute positively to the tax space.  He can be contacted via: pelumiabdul01@gmail.com or LinkedIn page.

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