People & Politics

September 1, 2021

People & Politics: FIRS must tax responsibly {Viewpoint}

By Ochereome Nnanna

For the second time in as many years, the Federal Government is mired in a dispute with a major multinational company of South African origin. Just last year, the dispute between it and MTN Nigeria ended with the latter being made to pay N300 billion for its failure to deactivate 5.2 million unregistered Subscriber Identification Modules, SIM, cards.

This year again, Multichoice Nigeria, MCN, is mired in a dispute of a different kind, this time with the tax authorities – the Federal Inland Revenue Service, FIRS. The Service recently issued a statement accusing the digital television service provider of tax fraud and multiple tax infractions. It proceeded to freeze the company’s accounts and engaged some commercial banks to recover the sum of N1.8 trillion of alleged unpaid taxes.

Alarmed and scandalised, MCN vehemently disputed the figure and approached the Tax Appeal Tribunal, TAT, for its judicial intervention. The TAT in its ruling on August 24, 2021, told Multichoice to first of all go and comply with Paragraph 15(7) of the FIRS Act before it can entertain the case on the next adjourned date, as required by law. This law provides as follows:

READ ALSO: Tax Dispute: MultiChoice disagrees with FIRS on N900bn order

“At the hearing of any appeal if the representative of the Service proves to the satisfaction of the Tribunal hearing the appeal in the first instance that: (A) the appellant has for the year of assessment concerned, failed to prepare and deliver to the Service returns required to be furnished under the relevant provisions of the tax laws mentioned in paragraph II; (B) the appeal is frivolous or vexatious or is an abuse of the appeal process”.

Or: “(C) It is expedient to require the appellant to pay an amount as security for prosecuting the appeal, the Tribunal may adjourn the hearing of the appeal to any subsequent day and order the appellant to deposit with the Service, before the day of the adjourned hearing, an amount, on account of the tax charged by the assessment under appeal, equal to the tax charged upon the appellant for the preceding year of assessment or one half of the tax charged by the assessment under appeal, whichever is less plus a sum equal to ten percent of the said deposit…”

For Multichoice, the most frightening part is that failure to comply with the above order, “the assessment against which (it) has appealed shall be confirmed and the appellant shall have no further right of appeal with respect to that assessment”.

FIRS interprets the Tribunal’s ruling to the effect that Multichoice must deposit N900 billion with it. This is far from the truth, as it is nothing near “an amount…equal to the tax charged upon the appellant for the preceding year of assessment”. On the other hand, Multichoice posits as follows:

“The direction that issued by the TAT in accordance with paragraph 5(7) of the Fifth Schedule to the FIRS Establishment Act requires Multichoice Nigeria to deposit with FIRS an amount equal to the tax paid by Multichoice Nigeria in the preceding year of assessment OR one half of the disputed assessment under appeal by Multichoice Nigeria in the previous assessed year which is substantially less than the disputed assessment”.

It is unfortunate that the above-quoted section of our tax law, by its very nature, could not accommodate MultiChoice’s quest for a judicial intervention to decide whether its figure or that of the FIRS is correct. The two sides are left to insist that each of them is right. Under this stalemate, FIRS is holding the whip’s handle with impunity. Yet, their N1.8 trillion tax assessment of MCN is clearly illogical and baseless. FIRS has not disclosed how it arrived at that fantastic figure. Tax is usually on profit, and I doubt that MCN even makes that much overall revenue.

If the tax law had allowed the company to present its case, it would have given the two sides the opportunity to show how they arrived at their respective figures for the court to decide. The two sides are also trading accusations. FIRS alleges that Multichoice is refusing to let its auditors examine their financial books. On the other hand, MCN says it is cooperating fully and will do everything possible to resolve this issue amicably.

This dispute should not be left to these two. If the impasse continues till the next hearing date at the Tribunal, MCN stands a chance of being wrongfully and avoidably exterminated as a business. The National Assembly, the Office of the Attorney General of the Federation, OAGF, and even the diplomatic machinery of Nigeria and South Africa should intervene as they did in the MTN case to allow Multichoice to make the appropriate and legally-valid tax deposit.

Multichoice’s books must be thoroughly audited to determine the right amount of taxes it owes the Federal Government. It does not call for sabre-rattling or power show.

The importance of a swift and amicable settlement cannot be over-emphasised. Multichoice is a Nigeria public quoted company and a big player in our economy. Apart from thousands of Nigerians under its direct employ, millions more depend on its value chains for their livelihood. If FIRS is allowed to implement its N1.8 trillion imposition, it will eliminate the company from our economy.

This will not augur well for an economy struggling to diversify and attract investors, neither will it benefit our ease of doing business drive. Already, the share price of the company has been taking a nosedive in the stock market and investors are already losing out.

In its drive to increase tax revenue, the Federal Government must also cultivate the instinct to protect the companies operating in Nigeria, be they local or foreign-owned. We should cater for the goose that lays the golden eggs, not kill them for Christmas or Sallah.

Multichoice should cooperate with the FIRS and ensure a professionally-done audit of the company’s revenues to determine the appropriate taxes it must pay to the Federal Government.

Vanguard News Nigeria