Tribunal orders MTN to pay $72.5m fine to FIRS
Written by Adeola Ibrahim on October 25, 2023
The Lagos state division of Tax Appeal Tribunal has ordered MTN Nigeria Communications to pay the sum of $72, 551, 059, in tax default to the Federal Inland Revenue Services. The fine covers for 2007 to 2017.
However, the Tribunal absolved the telecommunication firm from paying the sum of $21,039,807, as penalties and interest on the principal sum.
A five-man panel led by Professor A. B. Hamed, gave the verdict and order on Friday, while delivering judgment in an appeal numbered TAT/LZ/VAT/075, filed by the telecommunication company against the request by the FIRS to pay the default.
Other members of the panel were P. A. Olayemi, Babatunde Sobamowo, Samuel N. Ohwerhoye and Terzungwe Gbakighir.
The facts of the matter according to the processes filed before the appeal, was that sometime in May 10, 2018, the Office of the Attorney General of the Federation issued a report of its investigation into the MTN’s Forms A and M transactions. The report covered the 2007 to 2017 accounting years.
But, in a revised report dated August 20, 2018, the OAGF adjusted the alleged outstanding in respect of import duty and VAT to the tune of N242.2 bn, (Form M -visible transactions) whilst the section relating to VAT and Withholding tax (WHT) was revised $1.284 bn (Form A invisible transactions).
The processes also stated that sometime in mid-2020, the FIRS informed MTN that it had received a report from the OAGF in respect of its alleged liability to VAT and WHT.
FIRS consequently conducted a review of MTN’s tax and accounting records and upheld the OAGF’s alleged tax liability.
However, MTN and its tax consultant, KPMG Advisory Services, held a series of meetings with FIRS to resolve the tax dispute arising from MTN’s alleged tax liability.
Thereafter, in July 2021, the FIRS issued a VAT assessment of $93, 590, 366m to the MTN. This assessment comprised the sum of $72, 551, 059m, as the principal liability and $21,039,807m, for penalties and interest on the principal sum (first assessment).
MTN objected to the first assessment whereupon the FIRS further reviewed the assessment. Accordingly, by the Notice of Assessment dated April 14, 2022, the Respondent issued a revised assessment for US $135,697,755m to MTN as a revised assessment.
Although the principal amount of tax alleged to be outstanding and due from the Appellant (principal tax liability) in the revised assessment, i.e. $47, 776, 210m, was less than the alleged principal tax liability contained in the first assessment, i.e., $72,551,059m, the interest and penalty imposed by the FIRS on the alleged principal tax liability in the revised assessment, i.e. $87.900m, is higher than the interest and penalty imposed by the FIRS on the alleged principal tax liability in the first assessment, i.e., US $21, 039,807m.
Also MTN by a letter of notice of objection dated May 13, 2022, objected to the FIRS’s revised assessment, and FIRS by a letter dated June 16, with ref. no. FIRS/TID/LOS/2020/0213/01, notified the MTN of its refusal to amend the revised assessment.
The tribunal, after taking arguments on the parties, resolved issues one to four in favour of the FIRS, and issue five was resolved in favour of MTN.
