MTN shares tank as it gets hit with new $2 billion Nigerian tax nightmare

MTN Group has been hit with a $2 billion tax bill by Nigerian authorities, the mobile operator said on Tuesday.

The announcement comes as another major blow to MTN in its biggest market as it is already facing calls from the Central Bank of Nigeria to return $8.1 billion worth of historic dividends, through  repatriation.

As the news broke, shares in MTN declined yet again, having already given up 20%. By 13h45 on Tuesday, shares in the group fell R5.00, or 5.7%, to R82 on the JSE.

The Nigerian central bank elaborated on Sunday that MTN and lenders “flagrantly violated foreign-exchange violations” in taking cash out of the country over eight years through 2015.

Four banks were fined a combined $16 million, however, MTN was been left with the biggest headache, even though it would receive a naira-denominated refund in exchange for returning the $8.1 billion, according to the bank’s Deputy Governor Joseph Nnanna.

In a statement on Tuesday, MTN said that the Nigerian Attorney General (AG) has in recent months been engaging various corporates in Nigeria on an assessment of tax compliance relating to, inter alia, import duties, VAT and withholding taxes on foreign imports/payments.

“In this process his office made a high-level calculation that MTN Nigeria should have paid approximately $2.0 billion in taxes relating to the importation of foreign equipment and payments to foreign suppliers over the last 10 years and he requested MTN Nigeria to do a self-assessment of the taxes in this regard that have been actually paid,” MTN said.

The operator said that in August 2018, it submitted comprehensive documentation to the office of the AG. “MTN Nigeria has also completed an initial assessment of the full period which indicates that total payments made to the tax authorities in regard to these foreign imports and payments in aggregate are $700 million.

“There are valid reasons for the differences between the actual payments and the AG high-level assessment,” it said.

“We were notified by the office of the AG last week that they have not accepted the documentation presented and they have given notice of an intention to recover the $2.0bn from MTN Nigeria. Based on the detailed review performed MTN Nigeria believes it has fully settled all amounts owing under the taxes in question, MTN said.

The operator called the predicament both ‘regrettable’ and ‘disconcerting’ that despite the historic engagements with the Nigerian authorities by MTN Nigeria, the senate investigation into the CCI matter, and the multiple tax assessments done by the Nigerian tax authority over many years that were satisfactorily concluded, that these matters are being reopened.

“MTN Nigeria will continue to engage with the relevant authorities on all these matters and we remain resolute that MTN Nigeria has not committed any offences and will vigorously defend its position,” it said.

The news comes just three years after Nigeria hit the operator with a $5.2 billion fine – later reduced to about $1 billion – in an entirely separate dispute over SIM-card registration, Bloomberg noted.

The crackdown also comes as Nigeria president Muhammadu Buhari seeks re-election for a new four-year term in a February vote. His administration has gone after companies for irregularities as well as tax-defaulters, part of a wider pledge to fight corruption in Africa’s most populous nation, it said.

Read: MTN may get naira refund by paying $8.1 billion Nigeria demands

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MTN shares tank as it gets hit with new $2 billion Nigerian tax nightmare