MTN Nigeria hit with $2B tax bill alongside repatriation controversy

MTN Nigeria hit with $2B tax bill alongside repatriation controversy

MTN Group has hit another setback in Nigeria after the country’s government demanded that its local unit hand over $2 billion in unpaid back taxes.

The office of Nigeria’s attorney general reached this sum after concluding that MTN had failed to pay adequate supplier fees and import taxes for telecoms equipment for its Nigerian operations across the past decade.

In response to a request by the attorney general, MTN completed a self assessment of its finances and concluded that it had already paid the $700 million that it owed. The findings were rejected by the attorney general’s office.

Bloomberg quoted an anonymous MTN source as saying that the discrepancy in the final bills arose as the government had failed to account for various VAT exemptions and variable import rates, and had also assumed a flat rate on withholding tax. Additionally, it had not taken local supply into account.

The bill comes hot on the heels of MTN being ordered to refund $8.1 billion that the Central Bank of Nigeria claims was illegally repatriated from the market. MTN has dismissed both charges, saying: “We remain resolute that MTN Nigeria has not committed any offenses and will vigorously defend its position.”

Ron Klipin, a Johannesburg-based analyst at Cratos Wealth, said: “This could be an economic and political play by Nigeria. The Nigerian economy is looking for additional sources of revenue and at the same time the government wants to be seen as tightening up the regulatory framework in the country.”

Indeed, despite MTN protesting its innocence, its shares fell by 17% to a low of almost 12 years. This suggests that its investors aren’t convinced that the operator can avoid paying some or all of both the fine and the tax bill in Nigeria (which is the group’s largest market).

Nigeria President Muhammadu Buhari is currently seeking re-election in February, and has made stamping out corporate corruption a core pillar of his campaign. In particular, he has turned his attention towards tax avoidance and other unscrupulous behaviour by overseas companies – hence the particular scrutiny on MTN’s actions.

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