Telecommunication giants MTN Nigeria appears to be in fresh trouble after the Federal Inland Revenue Service (FIRS) queried the firm for deducting tax from the N330 billion fine it paid the Nigerian Communications Commission (NCC) for SIM card infraction.
The FIRS Chief, Babatunde Fowler, who insisted that MTN still has an issue to resolve despite “paying” the fine, said the company does not have the right to deduct tax from the money paid to the NCC.
He insisted that fines and penalties for regulatory infractions are revenues paid to the Federal Government and should not be subjected to any tax deduction.
“The MTN took a position that the fine or penalty should be tax-deductible. But the FIRS said that does not make sense. One cannot be given a penalty or fine, which is a punitive measure, and the company is saying it is tax-deductible so that it will get a tax credit on that,” the FIRS supremo added.
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Why this matters: According to a partner at Pillars & Grey Solicitors, Barr. Jesuwale Samson, it is important to understand that the N330 billion MTN paid to the NCC was as a result of the agreement between both parties.
The lawyer said: “It is a punitive sum. It is like me telling you to pay me N50 as punishment and you are now saying I will pay you the N50. But I can’t pay you what I’m supposed to pay you last week (maybe you were supposed to pay me N5), so you are now telling me you can’t pay me N55. It is only the N50 you will pay.”
While stressing that both parties would later head to court for interpretation, Samson said MTN still has to pay the tax owed the FIRS.
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The back story: The NCC had in October 2015 imposed a fine of N1.04 trillion on the telecommunications giants for non-compliance with a deadline set by the Commission to disconnect all unregistered SIM cards. The move by NCC followed accusations by mobile phone users that the regulator had failed to bring operators to account for poor services to subscribers.
The regulator later reduced the fine to N780 billion in December 2015, having taken into consideration the stability of the telecommunication sector. The fine was further reduced to N330 billion after MTN agreed to be listed on the Nigeria Stock Exchange (NSE). These agreements have now been fulfilled by MTN, including the listing of 20.3 billion shares in May this year.