PwC Faults Tribunal’s Ruling On ‘Tax Evasion’ Dispute Between Multichoice, FIRS

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PricewaterhouseCoopers (PwC) has faulted the ruling of the
tribunal on a tax evasion dispute between Multichoice Nigeria
Limited and the Federal Inland Revenue Service (FIRS).

This is contained in the August 2021 Tax Alert released by the
firm.

Multichoice is the owner of the satellite televisions, DStv and
GOtv – popular subscription-based platforms in Nigeria

In July, the FIRS had appointed some commercial banks as agents
to recover N1.8 trillion from accounts of Multichoice Nigeria
Limited (MCN) and Multichoice Africa (MCA) over allegations that
the companies had refused to grant FIRS access to its servers for
audit.

The FIRS said it determined through a forensic audit that
Multichoice Nigeria Limited failed to pay to the government of
Nigeria taxes worth N1.8 trillion.

Last Tuesday, the case was brought before a five-member tax
appeal tribunal (TAT) led by A.B. Ahmed, the tribunal chairman,
following an application filed by the counsel to FIRS.

After the tribunal hearing, confusion reigned between both
parties over the amount expected to be paid as security for
prosecuting an appeal before the TAT.

Abdullahi Ismaila Ahmad, FIRS spokesperson, said the tribunal
ordered Multichoice Nigeria Limited to deposit 50 percent of the
disputed N1.8 trillion tax — about N900 billion — with the
agency.

But Multichoice Nigeria said the directive issued by the TAT
does not compel it to make payment of 50 percent of N1.8 trillion,
being half of the disputed tax assessment.

The company said it is required “to deposit with FIRS an amount
equal to the tax paid by Multichoice Nigeria in the preceding year
of assessment OR one half of the disputed tax assessment under
appeal, whichever is the lesser amount plus 10%”.

PWC FAULTS TRIBUNAL OVER CONFUSION

In its report, PwC referred to paragraph 15(7) of the Fifth
Schedule to the FIRSEA which provides three conditions for the
tribunal to grant an order over the issue of security deposit.

“At the hearing of any appeal, if the representative of the
Service proves to the satisfaction of the Tribunal hearing the
appeal in the first instance that; a) the appellant has for the
year of assessment concerned, failed to prepare and deliver to the
Service returns required to be furnished under the relevant
provisions of the tax laws mentioned in paragraph 11,” the fifth
schedule reads.

“B) the appeal is frivolous or vexatious or is an abuse of the
appeal process; c) or it is expedient to require the appellant to
pay an amount as security for prosecuting the appeal.”

PwC said it is curious that the tribunal did not refer to any of
the three conditions in reaching its decision.

“As a result, the Tribunal did not mention which facts were
placed in proof of such condition(s), or how it considered that the
FIRS’ facts were cogent enough to trigger the provision,” the
report reads.

“The Tribunal ignored this critical part of the provision and
focused on the order for statutory deposit.”

The firm also cited paragraph 13 of the Fifth schedule to the
FIRSEA which provides for persons who are aggrieved by the
decisions of the FIRS to appeal such decisions to the Tribunal.

PwC said the only conditions to appeal such a decision is to
file the appeal within 30 days in the prescribed form and to pay
the necessary filing fees.

PwC also argued that it is not mandatory for the tribunal to
make the order for the statutory deposit.

It said even if the FIRS can prove at least one of the
conditions listed in the provisions, the tribunal may still
exercise discretion on whether to order Multichoice Nigeria to make
a statutory deposit or not.

The global tax and audit firm further said that the tribunal’s
order for the appellant to make “the required deposit as provided
under Schedule 5 para 15(7)…” is vague considering that the
provision requires the payment of the lower of: a) an amount equal
to the tax charged upon the appellant for the preceding year of
assessment; b) or half of the tax charged by the assessment under
appeal.

“A simple confirmation of the amount paid by MCN in the
preceding year of assessment, if any, would have enabled the
Tribunal to make a definite order that would not be open to
misinterpretation by both parties involved in the dispute,” it
reads.

“However, it is clear from the law that MCN is required to pay
the lower of the two amounts under the referenced provision of the
law.

“As analysed above, the Tribunal’s ruling, in this case, did not
provide insights into how they reached the conclusion that a
deposit was required based on the 3 conditions in the law.

“Therefore, there is room for taxpayers to challenge it if the
FIRS attempts to cite this ruling as a precedent to argue that
taxpayers must make a statutory deposit prior to filing an
appeal.

“It is advisable for the Tribunal to carefully consider the
requisite conditions for ordering the statutory deposits, and duly
exercise its discretion under the provision in good faith. Not
doing this may result in indiscriminate assessments and a decline
in taxpayer confidence in the appeal process.”

The case has been adjourned to September 23.