FIRS queries MTN’s tax deduction on multi-billion fine

Despite paying the N330 billion fine imposed on it for its failure to comply with regulatory directives in 2013, MTN Nigeria still has one issue to resolve over the matter, the Federal Inland Revenue Service (FIRS) Chairman, Tunde Fowler, has said.

The South African telecoms firm’s Nigeria subsidiary will have to resolve whether it has a right to deduct tax from the fine.

Mr Fowler said the management of the telecoms firm has since been told such deductions cannot be made, as fines and penalties for regulatory infractions are revenues to the federal government and are not subject 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,” Mr Fowler said.

Although MTN made the payment, Mr Fowler said the FIRS position that the fine and penalty cannot be considered as a tax-deductible item will not change.

“Initially they (MTN) made the payment on account. The FIRS said, no, it is not on account, but it is tax due to government,” he said.

“The alternative is for MTN to go to court and let the court (maybe Supreme Court) say the FIRS was wrong, and that such fines or penalties are tax-deductible,” he said.

Background

In October 2015, the Nigerian Communications Commission (NCC) imposed a N1.04 trillion (about $5.2 billion) fine on MTN for failure to disconnect 5.1 million unregistered Subscriber Identity Module (SIM) cards from its network.

The NCC gave the directive in 2013 to operators in the Nigerian telecoms sector to disconnect from their networks all unregistered SIM cards on or before July 1 of that year.

The NCC said failure to comply with the directive before the deadline attracted a fine of N200,000 for every SIM card, pursuant to Regulations 19 and 20, Section 15(2) of the Registration of Subscribers Regulations, Act 2011.

For failing to comply with the directive for over two years, the NCC invoked its regulatory powers and imposed the fine on MTN in 2015.

Following the intervention of the presidency in the matter, the fine was reduced by 68.3 per cent to N330 billion.

After four years, MTN completed the payment of the fine in line with a structured payment plan agreed with the NCC in 2016. According to the plan, the payment was scheduled to be completed by May 31, 2019.

Last May, the Executive Vice Chairman of NCC, Umar Danbatta, confirmed the completion of the payment of the fine by MTN.

‘Matter not yet over’

But, the FIRS chairman told PREMIUM TIMES in an exclusive interview the South African telecoms firm’s Nigeria subsidiary still has one issue to settle to finally let the matter rest.

When PREMIUM TIMES contacted MTN for a reaction, its spokesperson requested for time to cross-check the information and revert.

He did not get back with the information at the time of publication.