With $2bn Tax Arrears Demand by FG, It’s Double Jeopardy for MTN

Telecoms company insists all outstanding taxes cleared

Sign of more trouble for MTN Nigeria emerged yesterday as the federal government wrote the telecoms company, directing it to pay $2 billion as taxes it failed to remit to the government in the past 10 years.

This followed the call by a former senior executive of the company, who informed THISDAY last weekend that beyond the Central Bank of Nigeria’s (CBN) directive that the telecoms company should refund $8.134 billion, which it had illegally repatriated, the federal government should properly investigate MTN Nigeria’s operations in the country.

The Attorney General of the Federation (AGF) had notified MTN in a letter that his office

made a high-level calculation and came to the conclusion that MTN Nigeria should have paid approximately $2 billion in taxes relating to the importation of foreign equipment and payments to foreign suppliers over the last 10 years and requested the company to do a selfassessment of the taxes.

The AGF intends to recover up to $2 billion of tax relating to, inter alia, import duties, VAT and withholding taxes on foreign imports/payments, the government said.

The CBN last week slammed a fine of N5.87 billion on four banks over the violation of extant laws and regulations of the Federal Republic of Nigeria, including the Foreign Exchange (Monitoring and Miscellaneous Provisions) Act, 1995, and the Foreign Exchange Manual, 2006.

Also affected was MTN Nigeria, which the CBN directed to immediately refund $8,134,312,397.63, which was illegally repatriated by the telecoms company, to the coffers of the bank.

The CBN Governor, Mr. Godwin Emefiele, had on Monday, confirmed that MTN Nigeria would refund the money at the exchange rate at which they were remitted and not the current rate, leaving the company with the potential loss of over $4billion in exchange rate.

For the banks, the highest fine of N2,470,604,767.13 was slammed on Standard Chartered Bank, while Stanbic IBTC Nigeria was fined N1,885,852,847.45. Citibank also got fine of N1,265,541,562.31, just as Diamond Bank was directed to pay N250 million penalty.

But reacting to the latest allegation of tax evasion, MTN in the statement yesterday, insisted that it had cleared all outstanding taxes within the vexed period, saying it would continue to reject the findings of the AGF’s investigation because it believes it had fully settled all amounts owed under the taxes in question.

The statement also said MTN would, in strong terms, deny the allegations being made by the CBN, having provided further clarity on the company’s position on funds repatriation.

Speaking on the AGF’s demand notice for historical tax obligations, MTN Corporate Relations Executive, Mr. Tobe Okigbo, said, “MTN has conducted a detailed review of these claims and provided evidence of tax remittance to the AGF’s office. The AGF’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.

“MTN Nigeria will continue to engage with the relevant authorities on all these matters and we remain resolute that MTN Nigeria has not committed any offences and will vigorously defend its position.” According to him, in August 2018, MTN submitted comprehensive documentation to the office of the AGF.

He said, “MTN Nigeria has also completed an initial assessment of the full period, which indicates that total payments made to the tax authorities in regard to these foreign imports and payments in aggregate are $700 million. There are valid reasons for the differences between the actual payments and the AGF high-level assessment,” Okigbo said.

"We were notified by the office of the AGF last week that they have not accepted the documentation presented and they have given notice of an intention to recover the $2.0 billion from MTN Nigeria. Based on the detailed review performed, MTN Nigeria believes it has fully settled all amounts owing under the taxes in question,” he said.

Emefiele had said he was aware of all sorts of documents being paraded by different people with a view to misinform members of the public on the MTN Nigeria matter, saying the investigation of the telecoms company spanned over a period of 30 months, on several issues and not just on the illegal capital repatriation.

The CBN governor had explained, “The latest hammer came when they (MTN Nigeria) clearly took liberty for licence in flouting Nigeria’s foreign exchange laws in the manner of the funding of their equity investment into MTN and subsequent capital repatriation that resulted thereafter.”

“They brought in $402 million and said about $350 million of that was equity and the balance was loan, and they were issued Certificates of Capital Importation (CCIs) for the equity. They later reversed that position when they realised that the loans will not attract the kind of taxation equity investment will attract.

“And they altered the structure of their funding in a clear violation of the spirit and intent of Nigeria’s foreign exchange regulations.”

Emefiele had stressed MTN Nigeria manipulated the regulations for maximum profit and tax avoidance, without regards to the laws when they embarked on unauthorised conversion of loans to equity so as to game the system and exploit loopholes.

But addressing the CBN allegations, Okigbo said, “From the CBN’s own letter and subsequent statements, it is clear that there is no dispute that the capital captured in MTN’s books and for which CCIs were issued was imported into Nigeria, and this is acknowledged explicitly by the CBN.

“It is equally clear that Nigerian law provides for guaranteed unconditional transferability of funds through an authorised dealer in freely convertible currency relating to dividends or profits attributable to the investment, payments and in respect of loan servicing where a foreign loan has been obtained.”

The former senior executive at MTN Nigeria, who spoke with THISDAY on condition of anonymity, because of the non-disclosure and non- compete clauses of his termination benefits, claims had said there was a lot more with the payments than the MTN and banks want us to believe, calling for a forensic audit that would uncover much more.

He had also chided the financial institutions involved in the matter over what he described as their failure to adhere to the Know-YourCustomers (KYC) policy of the apex bank.

He had insisted that the capital inflow the telecoms company claimed to have brought into Nigeria as equipment finance were “over invoicing.”

The source had also said, “The invoices from the transactions were from third parties and sub-companies related to some of MTN directors. Some of the invoices were not directly from MTN itself.”

He said investors in the MTN Private Placement, which took place in February 2008, obtained foreign exchange loans from local banks for the purpose of investment in the telecoms company, only for them to subsequently repatriate foreign exchange as though they were foreign investors for FX which they sourced from Nigeria, at the official exchange rate.