FIRS vs. MultiChoice: Matters Arising
James Emejo revieZs the alleged indebtedness of MultiChoice to the federal government and the regulatory lapses on the part of tax authorities, highlighting the need to boost the tax compliance regime to enhance domestic revenue mobilisation, as Zell as a
The recently declaration by the Federal Inland Revenue Service (FIRS) that MultiChoice Nigeria Limited (MCN) and MultiChoice Africa (MCA) had defaulted in their tax obligations to the federal government over several years, had elicited probing question about the capacity of the Nigerian tax authorities to eͿectively enforce compliance as Zell as bring defaulters to book.
The development had also exposed the so-called multinationals for practising due process and governance only in principle - a Zhole lots of hypocrisy and lip service to good corporate governance.
2nly last Zeek, the FIRS (xecutive Chairman, Mr. Muhammad Nami, announced that it had commissioned some banks to recover N1.82 trillion from the accounts of MultiChoice Nigeria Limited (MCN) and MultiChoice Africa (MCA).
Preparatory to the collection of the amount, Zhich is arrears of tax liabilities of the companies, he said the service had also ordered that all local bank accounts of the tZo organisations, oZners of pay television, DSTV, should be frozen.
Nami, said the decision to appoint the banks as agents and to freeze the accounts Zere due to the group·s continued refusal to grant FIRS access to its servers for audit.
The FIRS accused the companies of breaching all agreements and undertakings Zith the agency and for not responding to correspondences.
Nami, in a statement issued by the Director, Communications and Liaison Department, FIRS, Mr. Abdullahi Ahmad, said MultiChoice, “lacked data integrity and are not transparent as they continually deny FIRS access to their records” adding that it is important that Nigeria ends all tax frauds that have been going on for too long.
According to him, all companies must be held accountable and made to pay their fair share of taxes, including back duty taxes oZed, especially VAT for Zhich they are ordinarily agents of collection.
He accused MultiChoice Nigeria of avoiding to give the FIRS accurate information on the number of its subscribers and income adding that the companies had also been involved in the under-remittance of taxes, Zhich necessitated a critical revieZ of its tax-compliance level.
Nami said the group·s performance does not reÁect in its tax obligations and compliance level in Nigeria.
Nami said: “The level of non-compliance by MultiChoice Africa (MCA), the parent company of MultiChoice Nigeria (MCN) is very alarming. The parent company, Zhich provides services to MCN, has never paid Value Added Tax (VAT) since its inception.
“The issue Zith tax collection in Nigeria, especially from foreign-based companies conducting businesses in Nigeria and making massive proÀt is frustrating and infuriating to the Federal Inland Revenue Service (FIRS).
“Regrettably, companies come into Nigeria Must to infringe on our tax laZs by indulging in tax evasion. There is no doubt that broadcasting, telecommunications, and the cable-satellite industries have changed the face of communication in Nigeria.
“HoZever, Zhen it comes to tax compliance, some companies are found Zanting.
They do Zith impunity in Nigeria Zhat they dare not try in their countries of origin.”
FIRS claimed Nigeria contributes 34 per cent of total revenue for the MultiChoice group folloZed by .enya Zith 11 per cent and =ambia Zith 1 per cent.
%ut the rest of Africa Zhere they have a presence accounts for 45 per cent of the group·s total revenue.
Nami said information currently at the disposal of FIRS revealed a tax liability of N1.822 trillion for years of assessment, including $342.53 million.
“8nder the FIRS poZers in Section 4 of the Companies Income Tax Act Cap C21 LFN 2 4 as amended, Section 41 of the Value Added Tax Act Cap V1 LFN 2 4 as amended and Section 31 of the FIRS ((stablishment) Act No. 13 of 2 , all bankers to MCA and MCN in Nigeria Zere therefore appointed as collecting agents for the full recovery of the aforesaid tax debt,” he stated.
He added that the banks are required to sZeep balances in each of the abovementioned entities· accounts and pay the same in full or part settlement of the companies· respective tax debts until full recovery.
He said: “This should be done before the execution of any transaction involving the companies or any of their subsidiaries. It is further requested that the Federal Inland Revenue Service be informed of any transactions before execution on the account, especially transfers of funds to any of their subsidiaries.”
FolloZing the FIRS rather damning pronouncement of MultiChoice, the subscription TV Àrm, in a rather limited response, said it had the media statements made by the FIRS, but had not received any notiÀcation from the agency.
It said: “MultiChoice Nigeria respects and is comfortable that it complies Zith the tax laZs of Nigeria.
“We have been and are currently in discussion Zith FIRS regarding their concerns and believe that Ze Zill be able to resolve the matter amicably.”
Nevertheless, analysts have Zondered Zhy a company of the size of MultiChoice Zhich operates in several other countries Zill indulge in an opaque operation particularly on tax matters and Zhy it had made it almost
impossible for tax authorities to audit its accounts - as this Zould have prevented the current backlash.
The company·s services had severally been called to question in recent times, folloZing its refusal to implement a pay-per-vieZ regime in Nigeria as Zell as allegations of arbitrary increase in subscription fees almost at regular intervals.
At a period Zhen Nigerians believed that DSTV is shortchanging its subscribers and reaping oͿ the country, the recent accusations of tax evasion, if proven Zould be a serious disservice to its interests.
MultiChoice had been called to question severally by the Federal Competition and Consumer Protection Commission as Zell as the National Assembly in recent times over its service oͿerings to Nigerians. It is argued that a company that beneÀts so much from the country ought to give back rather than Áeece the government of its due taxes.
But that said, the tax authority had also been called to question for partly alloZing for accumulation of tax arrears over a long period of time Zithout consequences.
It is also on record that the FIRS and the Joint Tax Board (JTB) had invested in technology and service automation over the years to among other things address revenue leakages and enhance seamless tax administration.
The extent to Zhich these innovations had beneÀtted tax administration is noZ been called to question by Nigerians.
In the recent past, the FIRS had embarked on aggressive enforcement regime Zhereby several individuals and big companies Zere engaged but nothing Zas heard about the non-compliance by MultiChoice in particular.
There are also accusations that the FIRS had over time been selective in its tax enforcement duties - mainly focusing on smaller companies Zhile bigger companies continued to pile up unpaid taxes.
Nonetheless, a corporate entity such as MultiChoice ought not to be found Zanting in payment of taxes Zhich should be a key parameters for good corporate governance assessment.
2nly recently amidst the C2VID-1 pandemic, the FIRS launched several regulatory forbearances and succour to tax payers, giving rebates among other beneÀts. It is still a Zonder that companies including MultiChoice Zill not embrace the dispensation to settle its indebtedness to the federal government.
Analysts also believed the fact that MultiChoice had been repeated for creating jobs in the country should not be an excuse to evade tax compliance.
Analysts Zho spoke in separate intervieZs on conditions of anonymity said MultiChoice and other multinationals operating in the country had not been fair to Nigerians given that they had beneÀted a lot but had given back little or nothing.
A reliable source said: “MultiChoice like MTN and many other South African companies have beneÀted tremendously from the opportunities implicit in post-apartheid South Africa via business opportunities opened up n most African countries especially Nigeria, Zhich is the biggest African market.
“While it is evident that multi choice and many of those South African companies do not give Nigeria any special treatment in terms of cost of their services notZithstanding our economies of scale advantage, they Zant to be clever by half by not paying their taxes as at Zhen due and or adopt the spurious Zays of tax avoidance. They are not fair to Nigeria that gave them conducive business opportunity in our huge market.
“More so, Nigeria noZ struggle Zith revenue and currency crisis that has made its economy to have passed through tZo recessions Zithin four years and bedeviled by sloZ, epileptic groZth and compounding debt crisis.”
The source added that “FIRS must insist on full payment of those taxes failing Zhich they should be appropriately sanctioned from Zithin the context of our existing legal frameZork.”
Another analyst said: “The issue of MultiChoice and FIRS is looking like a repeat performance of the NCC vs. MTN saga. The FIRS has a job to do by ensuring that organisations in Nigeria pay their tax promptly, accurately and as Zhen due but the tactics used must also conform to best practices.
“In as much as I don·t believe that MultiChoice is oZing FIRS to the tune of N1.8 trillion, I knoZ that they are culpable. Although the burden of proof is to be provided by FIRS but they have shifted the burden of proof to MultiChoice Zho must provide evidence that they are not oZing at all or they are not oZing that much.
“MultiChoice on one hand has been shortchanging the vieZing public by not subscribing to the pay-per-vieZ method as obtainable in other countries instead ripping us oͿ. I sense the government Zants to bring them to accountability.
“Finally, I strongly believe that if MultiChoice is culpable they should made to pay the appropriate tax accordingly.”
Also, a credible source had also Zondered Zhy it had taken the tax authority this long to demand for appropriate taxes.
“But my take is that, Zhy did the F*N leave it so long Zithout collecting the necessary taxes and noZ suddenly dumping a tax bill on MultiChoice?
“Whilst MultiChoice may be oZing, it is Zorth also looking at hoZ many people they employ. If they decide to leave Nigeria, are Ze the better for it?”