MTN Nigeria faces $47.8 million tax payment following appeal tribunal ruling
In a significant development impacting corporate taxation in Nigeria, MTN Nigeria has been directed by the Lagos division of the Tax Appeal Tribunal to pay a substantial sum of $47,776,210 in taxes.
The ruling, issued on October 20, 2023, marks the resolution of a protracted legal dispute that originated from a $2 billion back tax demand made by the former Attorney General of the Federation (AGF), Abubakar Malami, on September 4, 2018.
Initially contested by MTN Nigeria, the case took a different turn in 2020 when the AGF withdrew the demand, transferring the matter to the Federal Inland Revenue Service (FIRS) and Nigeria Customs.
This shift prompted a reassessment of MTN’s tax obligations.
The recent decision by a five-man panel, led by A.B. Hamed, significantly reduces the payable amount from the initial demand made five years ago. However, MTN is dissatisfied with the outcome and has filed an appeal at the tax appeal tribunal.
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For MTN, this ongoing tax dispute represents not only a financial challenge but also an opportunity to potentially influence an overhaul of Nigeria’s tax jurisprudence and finance system.
The company believes that resolving such disputes could foster improved business confidence within the country.
This case is being closely monitored by investors and businesses in Nigeria, as it could establish a precedent for future tax-related litigations and influence corporate governance in Africa’s largest economy.
Examining MTN Nigeria’s financial health is crucial in understanding the implications of the recent tax dispute. According to InvestingPro data, MTN Nigeria demonstrates high earnings quality, with free cash flow exceeding net income. This indicates that the company is generating more cash than necessary to operate the business, which is a positive signal for investors.
Additionally, InvestingPro suggests that MTN Nigeria has experienced accelerating revenue growth, potentially enabling the company to absorb the impact of the tax bill and continue operations without significant disruption.
Despite the legal challenges, MTN Nigeria has maintained strong earnings, allowing for continued dividend payments. This resilience is reassuring for investors, showcasing the company’s commitment to shareholder returns amid financial challenges.