MTN has supposedly been avoiding tax payment in Nigeria, using ‘Transfer Pricing’, which in this situation includes making payments to two oversea companies located in tax asylums; MTN Dubai, and MTN International in Mauritius.
Investigation paving the way to this report reveals that MTN has been doing these dubious activities on the Nigerian economy since 2010, despite the fact that they initially started operation in 2002.
The telecommunication company (MTN) admitted to making unapproved payment between around 2010 and 2013 to MTN Dubai in the amount of N37.6 Billion, without the approval of the National Office for Technology Acquisition and Promotion (NOTAP), a company set up to direct such transfers in Nigeria.
The transfers were then reportedly paid to MTN International in Mauritius, an outfit that is physically represented by just a mail station in Port Louis, and is without anyone from the staff.
An estimation of N90.2 billion has been reached as the whole amount in management fees that has been transferred out of Nigeria since 2002. This depends on a prior administration fees canceled by NOTAP, and in addition to other basis of MTN’s reported revenues.
Nigeria requires that management fees paid by multinationals are approved by NOTAP. MTN’s past concurrence with NOTAP lapsed in 2010, and until then, MTN Nigeria agreed with MTN Dubai to pay 1.75% of the incomes to the company for management, and in addition sovereign ties for the using of the MTN trademark.
However, payments were reversed after the inability to restore an agreement with Nigerian controllers.
As reported by MTN, the justification for paying management and technical services fees to a company without workers (MTN Dubai) is that the contracting partner (MTN) has the choice of releasing its contractual commitments as it esteems fit.
The company’s financial activities, especially in the area of management fees, are currently being probed by various African tax authorities.
In an announcement made by Cyril Ramaphosa, the South African representative, president, “tax evasion is not just a crime against the state; it’s also a crime against the general population of our country, ordinary people.” Incidentally, Rhamaposa was a non-official director on MTN’s board before getting to be deputy president, recommending he could be an “accomplice” in the crime he openly denounced, in Nigeria.
Even though, it remains a major issue in international tax, transfer pricing – the strategy utilized by MTN as a part of Nigeria – is not particularly illegal, with the exception of when it is as ‘transfer, mispricing’ which is manipulative and abusive, and happens more often under ‘reinvoicing’. However, it is still tax evasion, and represents a genuine threat to the development of any economy that it is practiced in.
Developing a country is more susceptible to the economic dangers that accompany the act of transfer pricing. Taxing multinational companies are a general battle that developing countries face. In this manner, to adopt a change at transfer pricing, tax authorities need to set up a strong tax assessment framework, complete with economic and legal preconditions and requirements.