- Problems are political – Bloomberg
Nigeria has asked MTN to pay $2 billion in tax arrears. The country’s attorney-general, Mr. Abubakar Malami, wrote MTN Nigeria this week demanding a payment of $2 billion in tax arrears to cover import duties, VAT and withholding taxes on foreign imports/payments.
MTN problem with Nigerian authorities appears on the rise. The demand is coming barely a week after the Central Bank of Nigeria (CBN) demanded the telecom operator refund $8.13 billion (about N2.5trillion) allegedly repatriated illegally out of Nigeria between 2007 and 2015 as dividends to offshore shareholders.
The office of the attorney-general said it made a “high-level calculation” that MTN should have paid approximately $2 billion in taxes relating to the importation of foreign equipment and payments to foreign suppliers since 2008.
On Tuesday, MTN outlined the tax dispute and refuted both accusations in a statement, according to Bloomberg, the telco “faces an uphill battle to convince investors it won’t end up shelling out for either or both offenses in its largest market. The shares extended their slump, falling 17 percent to an almost 12-year low by the close in Johannesburg.”
MTN troubles started in 2015. For failing to disconnect unregistered subscribers as prescribed by law, it was fined N780 billion by telecoms regulator, Nigerian Communications Commission (NCC). The fine was later reduced to N330 billion with provision for staggered payments. It is yet to finish paying the fine.
Bloomberg is suggesting that MTN’s problems are majorly political and may be tied to Nigeria’s 2019 elections.
Problems are political
According to Bloomberg: “This could be an economic and political play by Nigeria,” Ron Klipin, an analyst at Cratos Wealth in Johannesburg, said by phone. “The Nigerian economy is looking for additional sources of revenue and at the same time the government wants to be seen as tightening up the regulatory framework in the country.”
The additional scrutiny on MTN comes as Nigeria President Muhammadu Buhari seeks re-election for a new four-year term in a February vote. His administration has pledged to fight corruption in Africa’s most populous nation, including tax avoiders and companies acting unscrupulously. MTN is by far the biggest of Nigeria’s four wireless carriers, with about 54 million customers.
“We remain resolute that MTN Nigeria has not committed any offenses and will vigorously defend its position,” the Johannesburg-based company said.
Tax problem is misinterpretation of charges – The Cable
According to one report by The Cable: The office of Nigeria’s attorney general calculated that MTN owes $2 billion related to the import of foreign equipment and payments to suppliers over the past decade. It asked the South African company to carry out a self assessment in response, but last week rejected the company’s findings, which concluded that it had owed — and paid — $700 million. MTN reported the ongoing dispute for the first time Tuesday.
The difference between the $2 billion tax bill and the $700 million paid by MTN is due to different interpretations of charges ranging from VAT and withholding tax to import duties by the Nigerian government, said a person familiar with MTN’s thinking on the matter. The government assumed a flat rate on withholding tax, didn’t account for certain VAT exemptions, calculated an average duty on imports, whereas rates vary, and didn’t account for goods and services garnered from local suppliers, said the person.