The federal government has demanded the payment of $2 billion in tax arrears from Nigeria’s telecommunications giant, MTN.
This came barely a week after the Central Bank of Nigeria (CBN) ordered a return of $8.1 billion allegedly repatriated illegally by the company.
The attorney general of the federation and minister of justice, Mr. Abubakar Malami, in a demand notice to MTN Nigeria, said his office made a “high-level calculation” that the firm should have paid approximately $2 billion in taxes relating to the importation of foreign equipment and payments to foreign suppliers since 2008.
Malami requested MTN to do a self-assessment of the taxes.
MTN, in its response, said it did initial assessment showing that total payments already made to the tax authorities in regard to these foreign imports and transfers are $700 million.
It told the AGF that there were valid reasons for the differences between the actual payments and government’s assessment.
However, Malami has rejected the assessment and asked MTN to pay the $2 billion in full.
This came as the third heavy infraction by the largest mobile network operator in Nigeria within the last three years.
It would be recalled that in 2015, the Nigerian Communications Commission (NCC) fined MTN N1.04 trillion, which was later, reduced to N330 billion, for failing to disconnect 5.1 million unregistered subscribers.
MTN Nigeria is seen as the cash cow of the MTN Group and it contributes the largest subscribers to the Group’s subscriber base.
The group’s shares price listed on the Johannesburg Stock Exchange dropped 5.6 per cent yesterday to R81.95, bringing losses since last Thursday, when the CBN issued the $8.1 billion demand, to nearly 25 per cent.
But in its reaction to the notice, MTN said it had paid all due taxes relating to the items mentioned by the AGF.
MTN, in a statement signed by its public relations manager, Mr. Funso Aina, said: “We have conducted a detailed review of these claims and provided evidence of tax remittance to the attorney general’s office. The attorney general’s notice indicates that he is rejecting this evidence. We believe that all taxes due to the Nigerian government have been paid and these allegations have not been raised by any of the revenue generating agencies that MTN engages with regularly, and from whom MTN has received numerous awards for compliance.”
The company, which still has the CBN’s directive of $8.1 billion return to contend with, said both the CBN’s and AGF’s allegations are far from the truth.
“MTN continues to strenuously deny the allegations being made by the Central Bank of Nigeria and has provided further clarity on the company’s position. MTN equally strenuously rejects the findings of the Attorney General’s investigation and believes it has fully settled all amounts it owes under the taxes in question.
“It is both regrettable and disconcerting that despite the historic engagements with the Nigerian authorities by MTN Nigeria, the Senate investigation into the Certificate of Capital Importation (CCI) matter, and the multiple tax assessments done by the Nigerian tax authorities over many years that were satisfactorily concluded, that these matters are being reopened,” MTN said.
Recall that recently, the CBN sanctioned four banks and ordered MTN to return the $8.1 billion, which the apex bank alleged was illegally repatriated in collusion with the banks.
The CBN said the remittances between 2007 and 2015, in tranches of $2.63 billion; $1.766 billion and $348 million were done in flagrant violation of the rule that says it can only be done with regular CCIs issued by the apex bank.
The CBN said MTN did the repatriation after illegally converting shareholders’ loan of $399, 594,146 to preference shares.
But while giving further explanations on the CBN allegations, MTN’s Corporate Relations Executive, Tobe Okigbo, said MTN Group and the original shareholders injected a total of $402,625,419 into MTN Nigeria between 2001 and 2006 in the form of loans and equity.
“These initial inflows were the basis for the issuance of various legacy CCIs obtained from Authorized Dealers in accordance with regulations. The inflow of capital has been confirmed by the CBN,” he said.
Okigbo added that the CCI process is essentially in place both for the protection of investors as well as to provide the CBN with documentary evidence for monitoring capital inflows and outflows.
“Although over time the CCIs have been re-issued, consolidated and re-constituted to reflect the changing MTN capital and shareholding structure, the amount of $402, 625,419, has remained the same. One aspect of the changing capital structure was the conversion of shareholder loans to preference shares. It is important to note that all the historic dividends were declared against valid equity CCIs and in fact no preference dividends were declared and no interest in respect of these preference shares was paid,” he said.
Meanwhile, the Association of Telecommunications Companies of Nigeria (ATCOM), the umbrella body of telecom operators in the country, said it is disturbed by the recent government actions against one of its members, which it said could discourage investors from the sector.
According to the President of the Association, Mr. Olusola Teniola, the action of that nature sends wrong signal to the investment community.
He added that Nigeria’s telecom industry may witness stalled FDI if the CBN fails to clear the processes that led to the supposed irregularities in repatriating funds by MTN to the parent company.
Teniola wondered why CBN came up with the decision even when the National Assembly had cleared the telco in 2016.
“MTN is not the only multinational that is required to repatriate funds. So, in the case of MTN, it shows there is lack of consistency on the side of the government, particularly, those monitoring the processes,” the ATCOM President said.
Teniola warned that Nigeria could lose foreign investments to other countries if the current issue is not well managed.