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    MultiChoice: Andersen faults FIRS’ basis for N.18trn tax liability

    Chronicle EditorBy Chronicle EditorSeptember 8, 20211 Comment3 Mins Read
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    FIRS chairman, Muhammad Nami VAT
    FIRS chairman, Muhammad Nami
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    Leading tax and business advisory firm, Andersen, has questioned how the Federal Inland Revenue Service (FIRS) arrived at the N1.8 trillion tax bill it slapped on MultiChoice Nigeria, warning that it could harm the reputation of both parties.

    The firm’s position was contained in an article published on its website. Titled “Reputational Risks and Tax: MultiChoice as Case Study”, the article stated that the FIRS may have adopted a faulty computational premise as well as given an impression that it is prejudiced against foreign companies operating in Nigeria.

    The firm described as misleading the FIRS’ claim that Nigeria accounts for 34 per cent of the total revenue of the MultiChoice Group ahead of Kenya with 11 per cent and Zambia in third place with 10 per cent as the basis for arriving at N1.8 trillion and $342 million liability.

    Andersen, quoting the MultiChoice Group’s audited financial statements for 2019, said Nigeria accounts for 34 per cent of the group’s Rest of Africa (RoA), with the RoA accounting for 29.6 per cent of the group’s revenues.

    MultiChoice Nigeria announced a N1.2 billion package towards fighting COVID-19 in Nigeria

    “Thus, the effective total revenue of Nigeria to the group is 10.19 per cent. It is arguable that 10.19 per cent is significantly different from 34 per cent of total revenue. However, one cannot help but question whether some other parameters in the computation of the alleged tax liability are also misleading,” Andersen stated.

    Andersen also argued that the press statement issued by the FIRS hints at bias.

    • How MultiChoice Nigeria is promoting local languages and culture with Africa Magic channels

    “The FIRS Chairman observed that the issue with tax collection in Nigeria, especially from foreign-based companies conducting businesses in Nigeria and making massive profits is frustrating and infuriating,” the agency said.

    This, Andersen noted, amounted to delineation of taxpayers by nationality and could create bias in the mind of the public against foreign-owned companies.

    “Consequently, a routine tax audit of a foreign-based company that is profitable in Nigeria may trigger apprehension, given the perception that they are seen as worse offenders ab initio. As a matter of fact, the posture from the FIRS towards foreign-based companies may lead some to adopt the approach of being aggressive with tax planning, so that they can eventually concede to liabilities, which they believe the tax authorities will insist on establishing,” the firm said.

    While it commended the FIRS increasing tax collection despite economic challenges, Andersen advised the agency to be restrained in taking actions and issuing statements capable of putting a question mark on companies’ reputations, especially in an age of social media and instant messaging. It added that it is more beneficial for tax agencies to appear friendly, fair and develop an awareness of reputational risk, especially given Nigeria’s unimpressive ease of doing business indices. It equally noted that reputational risk can lead to distrust, with the ultimate consequence of underpayment of taxes or shortfall in tax collection.

    Andersen is the second major business advisory firm to question the position of FIRS. Last week, PricewaterCoopers, in its PwC Tax Alert, faulted the ruling of the Tax Appeal Tribunal on the dispute and its interpretation by the FIRS. The firm stated that the directive issued by the TAT does not compel MultiChoice to pay 50 percent of N1.8 trillion, being half of the disputed tax assessment before its appeal could be heard.

    It said MultiChoice is only required “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 tax assessment under appeal, whichever is the lesser amount, plus 10 per cent”.

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