Nigeria’s Federal Inland Revenue Service (FIRS) has directed some commercial banks to freeze and recover ₦1.8 trillion ($4.4 billion) from MultiChoice Nigeria (MCN) and MultiChoice Africa’s accounts.
The firms are subsidiaries of South Africa-based MultiChoice Group, which provides television and other entertainment services across Africa like DStv, GOtv, and video-on-demand platform, Showmax.
Per a statement issued on Thursday, July 8, 2021, by Abdullahi Ahmad, FIRS Director, Communications and Liaison Department, the decision followed the groups’ refusal to grant the tax authority access to their servers for audit.
In the statement, FIRS said that it discovered that the companies have persistently breached all agreements and undertakings with the Service. They did not promptly respond to correspondences and lacked data integrity and transparency. It also added that the group’s performance did not reflect in their tax obligations and compliance level in the country.
Referring to the group’s Nigerian subsidiary, the tax authority said MCN “has avoided giving FIRS accurate information on the number of its subscribers and income.”
According to Mohammed Nami, Executive Chairman FIRS, Nigeria contributed 34% of total revenue for the group and the bulk of revenue for MultiChoice Africa.
However, per TechCabal, MultiChoice’s results for the year ended March 31 show that South Africa accounted for 64% of total revenue, while its operations in the rest of Africa contributed 32% of revenue. The rest was generated from its international technology segment.
According to Reuters, MultiChoice Group makes a third of its business elsewhere on the continent outside South Africa. From the company’s annual report, Nigeria is its biggest market in that segment.
Interestingly, at the close of business yesterday, MultiChoice stocks on the Johannesburg Stock Exchange were down 7.38% from the previous day. The fall reached levels that have not been seen since October 2020.
Nigeria’s tax to GDP ratio has steadily declined between 2001 to 2020, reaching a record low of 6.3% in July 2020
With such an abysmal tax to GDP ratio — one of the lowest in the world — the country has tried to increase its tax base. In 2017, it introduced the Voluntary Assets and Income Declaration Scheme (VAIDS), from which the government claimed to have raised ₦70 billion
In 2019, it also increased its Value Added Tax from 5% to 7.5%, generating ₦1.53 trillion in 2020.
MultiChoice becomes the second South African company to face a crackdown from Nigerian authorities. MTN has been the subject of several penalties, the most recent which occurred in 2018 involved a $2 billion tax bill for payments to foreign suppliers. The bill was later withdrawn.
In an official reply, MCN said it had not received any notification from FIRS yet. It has however indicated that it is willing to engage the tax authority transparently and constructively. It also said its operations in Nigeria are continuing.
The company says it has been and is currently discussing with FIRS regarding their concerns and believes they can resolve the matter amicably.
It remains to be seen if these words will ring true in the coming days.
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