N1 Trillion Fine Could Cost MTN Additional N300b In Taxes

As MTN negotiates its recent N1 trillion penalty relating to its SIM card registration issues, Nairametrics gathers that it could be on the hook for another N300 billion in taxes. Tax consultants inform Nairametrics that penalties and fines are not tax exempt expenses and as such MTN may not be able to deduct this from their profits when arriving at taxable profits.

In Nigeria, not all expenses qualify as tax deductibles from profits. Such expenses are added back to profits and taxed accordingly at 30%. Based on this, a 30% company income tax on a N1 trillion penalty is a potential N300 billion in additional expenses for MTN and another windfall for the government.

Some analysts however, opine that it amounts to the same thing as the tax authority would have still taxed MTN on the N1 trillion regardless of whether it is a fine or not. However, if the opportunity cost of incurring that fine was an expense that should have been incurred or capital expenditure that would have helped improve the operations of the company, then that cost would have indeed materialized. Either way, this surely is not good news for shareholders of the company as N1 trillion fine or whatever it is reduced to may be costing them additional 30% in tax liabilities instead of savings.

Nairametrics gathers that MTN is still negotiating the penalties and is likely to be successful as international pressure from the foreign and local media, investors and the South Africa bears down on the government to soft pedal.