ABUJAABUJA -Nigeria’s revenue service said on Thursday it had instructed banks to freeze the accounts of media entertainment firm MultiChoice Africa and its Nigerian subsidiary for breaching agreements and denying access to their records for auditing.
The firms are part of South Africa-based MultiChoice Group, which provides television and other entertainment services across Africa.
MultiChoice is the latest South African firm to face a huge tax bill in Nigeria after MTN Group’s Nigeria unit was in 2018 ordered to pay $2 billion in taxes relating to the import of equipment and payments to foreign suppliers from 2007 to 2017. The tax demand was eventually dropped.
In the latest case, Nigeria’s Federal Inland Revenue Service (FIRS) said in a statement it had appointed commercial banks and agents to recover 1.8 trillion naira ($4.4 billion) in outstanding tax obligations from MultiChoice Africa and MultiChoice Nigeria.
“It was discovered that the companies persistently breached all agreements and undertakings with the Service, they would not promptly respond to correspondences, they lacked data integrity and are not transparent as they continually deny FIRS access to their records,” FIRS said.
“The companies are involved in the under-remittance of taxes which necessitated a critical review of the tax-compliance level of the company.”
This is contained in a statement issued by Mr Abdullahi Ahmad, Director, Communications and Liaison Department of FIRS in Abuja on Thursday.
The FIRS explained that the decision to appoint the banks as agents and to freeze the accounts was as a result of the groups’ continued refusal to grant FIRS access to their servers for audit.
The service said it discovered that the companies persistently breached all agreements and undertakings with the Service.
The Executive Chairman FIRS, Mr Muhammad Nami, was quoted as saying, “the companies would not promptly respond to correspondences, they lacked data integrity and are not transparent as they continually deny FIRS access to their records.
“Particularly, MCN has avoided giving the FIRS accurate information on the number of its subscribers and income.
“The companies are involved in the under-remittance of taxes which necessitated a critical review of the tax-compliance level of the company” Nami stated.
The service added that the groups’ performance did not reflect in their tax obligations and compliance level in the country.
The FIRS further noted that the level of non-compliance by Multi-Choice Africa (MCA), the parent Company MCN was very alarming adding that the parent company, which provided services to MCN had never paid Value Added Tax (VAT) since its inception.
“The issue with Tax collection in Nigeria, especially from foreign-based Companies conducting businesses in Nigeria and making massive profits is frustrating and infuriating to the FIRS.
“Regrettably, Companies come into Nigeria just to infringe on our tax laws by indulging in tax evasion. There is no doubt that broadcasting, telecommunications and the cable-satellite industries have changed the face of communication in Nigeria.
“However, when it comes to tax compliance, some companies are found wanting. They do with impunity in Nigeria what they dare not try in their countries of origin”.
The chairman stated that Nigeria contributed 34 per cent of total revenue for the Multi-Choice group saying that the next to Nigeria from intelligence gathering is Kenya with 11 per cent and Zambia in third place with 10 per cent.
According to him, the rest African countries where they have presence account for 45 per cent of the group’s total revenue.
“Information currently at the disposal of FIRS has revealed a tax liability for relevant years of assessment for ₦1.8trillion and 342.5 million dollars.
“FIRS is powered in Section 49 of the Companies Income Tax Act Cap C21 LFN 2004 as amended, Section 41 of the Value Added Tax Act Cap V1 LFN 2004 as amended and Section 31 of the FIRS (Establishment) Act No. 13 of 2007.
“We these relevant sections all bankers to MCA and MCN in Nigeria are therefore appointed as Collecting Agents for the full recovery of the aforesaid tax debt.
“In this regard, the affected banks are required to sweep balances in each of the above-mentioned entities’ accounts and pay the same in full or part settlement of the companies’ respective tax debts until full recovery.
“This should be done before the execution of any transaction involving the companies or any of their subsidiaries. It is further requested that the FIRS be informed of any transactions before execution on the account, especially transfers of funds to any of their subsidiaries.
”It is important that Nigeria puts a stop to all tax frauds that had been going on for too long and all companies must be held accountable and made to pay their fair share of relevant taxes including back duty taxes owed especially VAT,” he said
MultiChoice Group shares were down 3.73% at 0923 GMT following FIRS’ statement.
MultiChoice Group in South Africa and its Nigerian subsidiary said they would issue a statement soon.
MultiChoice Group, spun off in early 2019 from Naspers, Africa’s biggest company by market capitalisation, reports revenues in primarily two segments – South Africa and the rest of Africa.
The rest of Africa segment contributes up to a third of its revenues, out of which its biggest market is Nigeria, the company said in its annual report for the year ended March 31.