Nigerian court adjourns $2bn tax case against MTN

The South African cellular service company has more than 55 million subscribers in Nigeria.

MTN South Africa
Nigeria's attorney general's office says MTN Nigeria failed to pay $2bn in taxes and should be fined for this alleged infraction [File: Siphiwe Sibeko/Reuters]

The next legal battle between the attorney general of Nigeria and the West African nation’s largest cellular service provider is set for October 29, 2019. The case, which centres around a $2bn unpaid tax bill, was supposed to open Wednesday. Lawyers for the attorney general’s office requested more time to prepare their case and file a response.

The attorney general’s office says MTN Nigeria failed to pay $2bn in taxes and penalties. MTN counters that the attorney general’s office does not have the power to determine unpaid taxes and therefore it should neither have to pay the tax bill nor related fines. The cellular service provider is asking the court to rule on the legitimacy of the case.

“MTN Nigeria maintains its stand that we are in full compliance with all extant tax and regulatory obligation,” the company said in a written statement released Wednesday. “We reiterate our commitment to obeying all Nigerian laws, rules, and regulations that govern and guide our business practices.”

MTN is demanding three billion naira ($8.3m) in general and exemplary damages, as well as legal costs to the company.

The case is being closely watched by local and international investors. It is one of several legal and administrative challenges that the South-African-owned firm has faced over the last four years in Nigeria. MTN Nigeria has also faced past tax demands and a fine over unregistered SIM cards.

MTN Group is a South African company. Its Nigerian division has more than 55 million cellular subscribers. According to an official statement, MTN Nigeria’s operations directly or indirectly provide jobs for more than half a million people in Nigeria.

MTN Nigeria used to be MTN Group’s most lucrative division, accounting for up to one-third of the group’s total revenue.

Beginning of legal trouble

MTN Nigeria’s trouble started in May 2018, when Justice Abubakar Malami – then serving as Nigeria’s Minister of Justice and Attorney General – asked the company to conduct a self-assessment of its tax obligations over the last 18 years and to report it to the ministry.

MTN Nigeria protested the request, claiming that the attorney general has no statutory powers over tax matters, and that even if it did, Nigeria’s statute of limitations only provides a seven-year window for new investigations.

Federal Inland Revenue Service (FIRS) – the agency responsible for assessing and collecting taxes – is not involving itself in the case and is not officially offering an opinion on the matter.

MTN is refusing to pay a $1.3bn fine that would go into the attorney general’s Fund Recovery Account. It went to court to challenge this and won an earlier decision. The judge struck down a preliminary objection raised by the attorney general against the lawsuit.

Further complicating the situation, Nigeria does not presently have an attorney general, as Justice Malami stepped down in May. The federal cabinet was dissolved on May 28, and President Muhammadu Buhari still has not made a new appointment.