I have been struggling to understand the rationale behind the imposition of N1.8 trillion against Multichoice by the Federal Inland Revenue Service (FIRS).
I also was confused as to why the Tax Tribunal would demand that the company deposits half of the amount, and show proof too, before its appeal against the N1.8 trillion imposition would be heard.
The Tax Tribunal had said that failure to deposit half the charged sum would mean failure of the appeal, which implication is that the company will pay N1.8 trillion, even if it was wrongly taxed.
I was imagining the stress that company would be going through trying to prove to an FIRS that had made up its mind and imposed that amount that it was not in default of its tax obligations to Nigeria.
Yes, there are reasons to suspect that foreign multinationals operating in Nigeria had, in the past, and maybe present, found their way round Nigerian tax laws and short-changed the country. But in the instant case, what I have read, coming from FIRS, as reason for the imposition of N1.8 trillion tax on Multichoice is that the company failed to let FIRS into its books and also failed to order its franchise holders to open their books to the revenue services. For this reason, FIRS, in its wisdom, or lack of it, sat back with its consultants and calculated the company’s subscriber base at 20 million and them imposed a tax on this number.
The suggestion here is that FIRS, and its consultants, acted on its own imagination and without the actual and proper numbers. Multichoice insists that it is not in default of its tax obligations to Nigeria. It also insists that it is not within its corporate responsibilities and powers to order franchise holders, which are independent businesses, to let FIRS into their books. I have been trying to understand the Nigerian law that compels businesses like Multichoice to order their franchise owners, not subsidiaries, to obey regulatory and tax laws.
If it is difficult for FIRS to execute its mandate against such franchise holders, why punish another company? Or, is the punishment another way of squeezing foreign multinationals for more cash in the era of cash mop-up to refloat a collapsed economy?
However, my biggest concern here is the tax law that mandates FIRS to impose an imaginary amount on any company, as assessment, and further use legal means to compel such company to deposit half of the imposed sum before its appeal could be entertained. Otherwise, it must pay as imposed.
The law reads: “The tribunal may adjourn the hearing of the appeal to any subsequent day and order the appellant to deposit with the service, before the day of the adjourned hearing, an amount, on account of the tax charged by the assessment under appeal, equal to the tax charged upon the appellant for the preceding year of assessment or one half of the tax charged by the assessment under appeal, whichever is the lesser plus a sum equal to ten percent of the said deposit, and if the appellant fails to comply with the order, the assessment against which he has appealed shall be confirmed and the appellant shall have no further right of appeal with respect to that assessment.”
This cant be any other thing but draconian.
This implies that the company so punished will have to deposit N900b plus additional 10 per cent of this amount with FIRS before its appeal against the assessment, or imposition, would be heard. Failure to make such deposit translates to the fact that it must pay the N1.8 trillion to the FIRS coffers. But this raises some questions, which FIRS must answer.
First, how did it arrive at N1.8 trillion as tax assessment for the company in question? What are the metrics? Can those metrics be made available to the public in the spirit of transparency and the public’s right to know? (Other companies may learn from it).
Is tax not charged on profit? Or is the FIRS suggesting that tax for Multichoice is charged on its supposed 20 million subscribers? If tax is charged as a percentage of profit, is FIRS suggesting that Multichoice made more than N1.8 trillion in the fiscal year under assessment? Or is the quest to meet target and shore up government revenue for reckless spending driving the service to over-tax corporate entities? Is FIRS suggesting that a 20 million subscriber base translates to 20 million subscriptions monthly? That could be a wrong assessment arithmetic because many Nigerians who hitherto subscribed to Multichoice product, DSTV, have since ‘ported’ to other cheaper platforms like Startimes and TSTV due to stifling economic realities of inflation and lower purchasing power. As it is, I imagine how many Nigerians still subscribe to DSTV’s full bouquet.
On this score, FIRS and its tax consultants, failed a test. It needs to get back to its basics so as to understand that posting 100 million subscribers does not automatically translate to 100 million monthly subscriptions, just like having 100 million followers on your business page on social media does not necessarily translate to 100 million customers.
More than half that number could actually be in abeyance. Many of those subscriptions are inactive in villages, like mine, and become active only during festive periods when the subscribers are able to beat insecurity and rejoin kith and kin for celebrations. Otherwise, they remain forever inactive.
I have not denied the possibility of Multichoice defaulting in its tax obligations along the line, though it had said it was up to date and in fact, was the first company to voluntarily open its servers and books to FIRS to examine. However, the metrics that led to an assessment and demand to pay N1.8 trillion as tax suggests something unpleasant for business. Further, the law that demands that a tax appellant must deposit half of the assessed sum, plus 10 per cent, before its appeal could be entertained, is draconian.
It is not an incentive to the ease of doing business in Nigeria. It can only encourage briefcase investors who would come with nothing, invest nothing but take away as much as is possible before FIRS comes banging on the doors.
Everyone knows that Nigeria is not in sweet financial stead because of high-level insecurity that has forcefully shut investments in parts of the country, which has also forced government into massive borrowing. However, the cure for this reality is not to over-tax businesses that still believe in Nigeria and are willing to remain.
Doing so will mean asking them to close shop and leave. The trend may not be limited to multinationals. Indigenous companies may suffer the same fate, if the trend is not checked. Mind you, a business that is appropriately taxed will leave FIRS office with a handshake.