Tribunal finds MTN guilty of tax default, orders $72.5 million payment

MTN Nigeria Communications has been ordered by the Lagos Zone Tax Appeal Tribunal to pay $72.5 million to the Federal Inland Revenue Services (FIRS) for tax evasion from 2007 to 2017. The tribunal, however, exempted the telecom giant from paying $21 million in penalties and interest on the principal amount.

The tribunal, led by Prof. A. B. Hamed, delivered the judgement  after hearing the appeal filed by MTN against the FIRS’s assessment of its tax liability. The tribunal upheld the FIRS’s claim that MTN had failed to remit the correct amount of value-added tax (VAT) and withholding tax (WHT) on its transactions involving Forms A and M.

Forms A and M are documents used by importers and exporters to declare their transactions to the authorities. The Office of the Attorney General of the Federation (OAGF) had conducted an investigation into MTN’s Forms A and M transactions from 2007 to 2017 and issued a report in May 2018, which was revised in August 2018.

The report alleged that MTN had underpaid its import duty and VAT by N242.2 billion and its VAT and WHT by $1.284 billion. The FIRS received the report from the OAGF and conducted its own review of MTN’s tax and accounting records, which confirmed the OAGF’s findings.

MTN and its tax consultant, KPMG Advisory Services, had tried to resolve the tax dispute with the FIRS through a series of meetings, but they could not reach an agreement. The FIRS then issued a VAT assessment of $93.6 million to MTN in July 2021, which included $72.6 million as the principal liability and $21 million as penalties and interest.

MTN objected to this assessment, and the FIRS revised it in April 2022, reducing the principal liability to $47.8 million but increasing the penalties and interest to $87.9 million. MTN also objected to this revised assessment and appealed to the tribunal.

The tribunal, after considering the evidence and arguments of both parties, ruled in favour of the FIRS on the principal liability but against it on the penalties and interest. The tribunal held that MTN had failed to prove that it had paid the correct amount of VAT and WHT on its Forms A and M transactions and that it had violated the provisions of the VAT Act and the Companies Income Tax Act.

The tribunal, however, found that the FIRS had not followed due process in imposing the penalties and interest on MTN and that it had acted arbitrarily and excessively. The tribunal therefore ordered MTN to pay only $72.5 million as its tax default to the FIRS within 30 days of the judgement or face further sanctions.