FDI: FG’s Move Against Multichoice May Discourage Investors

The recent announcement by the Federal Inland Revenue Service (FIRS) that it is set to recover N1.8trillion in outstanding taxes from South African pay- TV company, Multichoice, owners of DSTV, may deter foreign companies from setting up shop in Nigeria, according to a report by Reuters.

Citing how Nigeria failed to get anything from a $2 billion tax bill it leveled against another South African company, mobile phone giant, MTN, in 2019, the report said that Nigeria’s reputation as an investment destination would be adversely affected when companies and individuals assume that the country’s tax bills are either negotiable or avoidable.

In fact, according to the report, Multichoice shareholders believe that only a fraction of the FIRS’ initial demand will probably have to be paid. The report said: “Judging from the company’s seven per cent share price drop(after the FIRS announcement), investors are braced for a penalty in the region of $260 million, 94 per cent less than Nigeria is demanding. Even that might be an overestimate.

“A $2 billion tax bill levelled against South African mobile phone giant MTN in 2019 came to literally nothing a year later. And the $8 billion that the central bank demanded from the same telecommunications company for supposedly illegally repatriated dividends became a $53 million wrist slap.

“Such missteps hurt the credibility of the Nigerian authorities. Companies and individuals will naturally assume tax bills are either negotiable or avoidable. Nor does it enhance the credentials of Africa’s most populous nation as an investment destination.

At the height of its dispute, MTN even threatened to pack up and go home. Fear of being randomly targeted may deter foreign companies from setting up shop there in the first place.”

The report noted that a lack of Foreign Direct Investment (FDI) would undermine President Muhammadu Buhari’s efforts to end Nigeria’s dependence on oil exports.

“With global oil demand set to plummet by 2050, Nigeria will have a big gap in its coffers to plug. But randomly targeting companies is short-sighted. Boosting VAT receipts or adding consumer levies on things like mobile phone airtime may be politically unpopular but will both raise more revenue and be less damaging to Nigeria’s economy,” the report stated.

New Telegraph reports that in a statement issued by the Director, Communications and Liaison Department at the FIRS, Abdullahi Ahmad, on July 9, the Service announced that it had engaged some commercial banks as agents to freeze and recover N1.8 trillion from accounts of MultiChoice Nigeria Limited and MultiChoice Africa.

The FIRS explained that the decision to appoint the banks as agents and to freeze the accounts was as a result of the groups’ continued refusal to grant FIRS access to their servers for audit.

The Executive Chairman FIRS, Muhammad Nami, was quoted as saying, that: “The companies would not promptly respond to correspondences, they lacked data integrity and are not transparent as they continually deny FIRS access to their records.

“Particularly, MCN has avoided giving the FIRS accurate information on the number of its subscribers and income. “The companies are involved in the under-remittance of taxes which necessitated a critical review of the tax-compliance level of the company,” Nami stated.

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