Leading tax and business advisory firm, Andersen, has questioned how the Federal Inland Revenue Service (FIRS) arrived at the N1.8 trillion tax bill it slapped on MultiChoice Nigeria, warning that it could harm the reputation of both parties.
The firm’s position was contained in an article published on its website, entitled “Reputational Risks and Tax: MultiChoice as Case Study”, the article stated that the FIRS may have adopted a faulty computational premise as well as given an impression that it is prejudiced against foreign companies operating in Nigeria.
The firm described as misleading, the FIRS’ claim that Nigeria accounts for 34 per cent of the total revenue of the MultiChoice Group ahead of Kenya with 11 per cent and Zambia in third place with 10 per cent as the basis for arriving at N1.8 trillion and $342 million liability.
Andersen, quoting the MultiChoice Group’s audited financial statements for 2019, said Nigeria accounts for 34 per cent of the group’s Rest of Africa (RoA), with the RoA accounting for 29.6 per cent of the group’s revenues.
“Thus, the effective total revenue of Nigeria to the group is 10.19 per cent. It is arguable that 10.19 per cent is significantly different from 34 per cent of total revenue. However, one cannot help but question whether some other parameters in the computation of the alleged tax liability are also misleading,” Andersen stated.
Andersen also argued that the press statement issued by the FIRS hints at bias.
“The FIRS Chairman observed that the issue with tax collection in Nigeria, especially from foreign-based companies conducting businesses in Nigeria and making massive profits is frustrating and infuriating,” the agency said. This, Andersen noted, amounted to delineation of taxpayers by nationality and could create bias in the mind of the public against foreign-owned companies.
“Consequently, a routine tax audit of a foreign-based company that is profitable in Nigeria may trigger apprehension, given the perception that they are seen as worse offenders ab initio. As a matter of fact, the posture from the FIRS towards foreign-based companies may lead some to adopt the approach of being aggressive with tax planning, so that they can eventually concede to liabilities, which they believe the tax authorities will insist on establishing,” the firm said.