In a significant ruling, the Lagos State Division of the Tax Appeal Tribunal has ordered MTN Nigeria Communications to settle a tax liability of $72,551,059 with the Federal Inland Revenue Service (FIRS). This substantial fine pertains to tax defaults spanning from 2007 to 2017.

A panel of five, presided over by Professor A. B. Hamed, issued this verdict on Friday, concluding an appeal filed by MTN against the FIRS’s demand for payment of the outstanding tax.

This case’s genesis dates back to May 2018 when the Office of the Attorney General of the Federation initiated an investigation into MTN’s Forms A and M transactions, covering the accounting years from 2007 to 2017. In August 2018, a revised report adjusted the alleged outstanding tax liability to N242.2 billion for import duty and VAT, while the section related to VAT and Withholding Tax (WHT) was revised to $1.284 billion.

In mid-2020, the FIRS informed MTN about an OAGF report regarding its alleged liability to VAT and WHT. The FIRS subsequently reviewed MTN’s tax and accounting records, upholding the OAGF’s asserted tax liability. In July 2021, the FIRS issued a VAT assessment of $93,590,366 to MTN, encompassing $72,551,059 as the principal liability and $21,039,807 in penalties and interest on the principal sum.

MTN contested the initial assessment, prompting the FIRS to conduct a further review and subsequently issue a revised assessment in April 2022, totaling $135,697,755.

While the principal tax liability in the revised assessment was lower, $47,776,210, than in the first assessment, $72,551,059, the interest and penalties imposed by the FIRS in the revised assessment, $87.9 million, exceeded those in the first assessment, $21,039,807.

Following MTN’s objection to the revised assessment in May 2022, the FIRS, via a letter dated June 16, refused to amend the assessment.

Unsatisfied with the FIRS’s amended revised assessment, MTN escalated the matter by filing an appeal before the Tax Appeal Tribunal.

Upon a thorough review of all submitted documents, the tribunal identified five key issues for determination. These issues revolved around whether certain transactions qualified as taxable, the authority to conduct a tax investigation, and the imposition of interest and penalties.

While MTN’s counsel sought a favorable resolution of these issues, the FIRS’s legal team urged the court to dismiss MTN’s appeal. The tribunal ultimately ruled in favor of the FIRS on issues one to four and in favor of MTN on the fifth issue, pertaining to penalties and interest.

In their final analysis, the tribunal ordered MTN to settle the assessed tax liabilities in accordance with the resolved issues. However, they set aside the penalties and interest, offering a glimmer of hope to the telecommunications giant.

Source: [Punch]