The coalition group, Civil Society Network Against Corruption (CSNAC), petitioned the Economic and Financial Crimes Commission (EFCC) over the activities of telecommunications giant MTN alleging that the organisation has been routinely shipping billions of Naira abroad in other to avoid paying its fair share of taxes in Nigeria.

To substantiate his claims, the Chairman of CSNAC Olanrewaju Suraju cited a report published on October 26th by the online newspaper Premium Times.  

The petition, which can be found in its entirety below, explores the many ways in which MTN Nigeria evaded paying taxes.


10th November, 2015                                                                        
The Chairman,
Economic and Financial Crimes Commission,
No. 5, Fomella Street,
Off Adetokunboh Ademola Crescent,
Wuse II, Abuja.

Dear Sir,

INVESTIGATION INTO THE ACTIVITIES OF MTN NIGERIA ON ALLEGED ECONOMIC FRAUD & NON REMITTANCE OF ACCURATE TAXES

Civil Society Network Against Corruption (CSNAC) is a coalition of over hundred and fifty Anti-corruption organizations whose primary aim is to constructively combat corruption vigorously and to ensure the effective monitoring of the various Anti-graft agencies in the fight against corruption and contribute towards the enthronement of transparency, accountability, probity and total commitment in the fight to eradicate corruption in Nigeria.

In its report of the 26th of October, 2015, the Premium Times, an online newspaper, reported how its 11-month investigation revealed that MTN Nigeria has been routinely shipping billions of Naira abroad in other to avoid paying its fair share of taxes in Nigeria. This, MTN has been doing through the use of a complex but noxious tax avoidance technique called Transfer Pricing. The investigation showed that MTN Nigeria has been making payments to MTN Dubai and MTN International in Mauritius to evade taxes in a slush.
The report states that it was discovered that in 2013 for example, MTN set aside N11.398 Billion from MTN Nigeria to pay to MTN Dubai. A similar transfer of N11.789 Billion was made by MTN Ghana to the same MTN Dubai, making it a total of N23.187 Billion that was shipped to the Dubai offshore account. In a rare disclosure in 2013, MTN admitted it made unauthorized payments of N37.6 Billion to MTN Dubai between 2010 and 2013. The transfers were then “on-paid” to Mauritius, a shell company with zero number of staff and which physical presence in the capital Port Louis is nothing more than a post office letter box. The disclosure amounted to a confession given that MTN made the dodgy transfers without seeking approval from the National Office for Technology Acquisition and Promotion (NOTAP), the body mandated to oversight such transfers.

Furthermore, the report states that “Transfer Pricing” is the new technique adopted by corporate organisations who want to evade taxes and still remain on the right side of the law. Multinationals employ Transfer Pricing to move their profits offshore, leaving behind a shrinking tax base in their host countries and inexorable cuts to public services. In Africa, tax avoidance has been named as one of the factors holding the continent back by starving governments of the revenues it needs for development.

A report jointly commissioned by the United Nations and the African Union and drafted by a high level panel led by former South African President Thabo Mbeki considered tax avoidance by multinationals an “illicit financial flow” and a significant drain on government resources across the continent. In total, illicit financial flows, which included corruption and the proceeds of crime, were determined to be costing the continent $50billion a year. MTN is the largest cell phone company in Africa with 227.5 million subscribers. The company, which operates in more than 20 countries across Africa and the Middle East, has Nigeria as its biggest operation and thus makes a lot of revenue here, and invariably should pay more in taxes. To pay little or no tax, companies determined to cheat begin by seeking ways to create artificial operating costs in the country where they operate. So, where a company has a parent or subsidiary company in another country, but decides to declare a much lower profit before tax in its host country, it pays the parent and/ or subsidiary company for services not rendered and ships cash to them; and where services are rendered, the costs are inflated. MTN has a substantial network of subsidiaries in offshore tax havens, including the British Virgin Islands, Dubai and Mauritius.

Because of the growing concerns that multinationals are using intra-company trading to shift profits around the world by overcharging for services delivered or in more extreme cases by creating artificial transactions where no service was rendered at all, respective countries have a maximum percentage of profits it can allow companies to pay out as management fees. Until 2010, MTN Nigeria had an agreement with MTN Dubai to pay 1.75% of revenues to the company for management, and royalties for the use of the MTN trademark. Nigeria requires that management fees paid by multinationals are approved by the National Office for Technology Acquisition and Promotion (NOTAP). The fee payments had been reversed following a failure to come to a new agreement on management fees with Nigerian regulators.

MTN’s previous agreement with NOTAP expired in 2010. Notwithstanding, MTN has continued to make payment overseas. This has also led to the investigation of its financial activities in Ghana by the Ghana Investment Promotion Centre (GIPC). Dubai is also one of the places MTN ships huge profits to yet it does not operate any mobile phones in Dubai. However, MTN said that it employs around 115 people in Dubai who provides services to the MTN group such as group procurement, group finance, legal services, human resources and other corporate functions. MTN’s economic fraud activities has also not gone unnoticed in Uganda as the Uganda Revenue Authority (URA) has revealed that the company is paying 3% of its turnover in management fees to MTN International. The fees have been challenged by the Uganda Revenue Authority (URA) who issued MTN with a “notice of assessment” in 2011. This was for a number of tax issues between 2003 and 2009, but a large portion was to do with a dispute over management fees, most of which had been paid to Mauritius.

The report also states that correspondence between the URA and MTN shown to the newspaper reporters showed that the URA questioned the legitimacy of these fees, and pointed out that MTNI, the company providing “management services” to MTN Uganda had not spent any money in the years they had looked into. The URA said this could only mean two things: that management services provided to MTN Uganda had either already been paid for by MTN Uganda (and so MTN was in effect charging twice for the same thing) or they were never provided at all.

Efforts to get MTN to comment on its practices in Nigeria proved abortive as the newspaper was met with stiff resistance as the company said “there is no disclosure obligation for this information in South Africa or Nigeria.” among other responses.

NOTAP and the Federal Inland Revenue Service (FIRS) have not made any concrete statement on the said issues. PREMIUM TIMES made sustained efforts to get NOTAP and the Federal Inland Revenue Service (FIRS) to comment on the MTN practices in Nigeria. The Director in charge of Technology Transfer and Agreement, Ephraim Okejiri, initially pleaded that he was in a meeting, and that the reporter should wait. But after over four hours of waiting, he sent a secretary to say he would not be able to give any information on MTN. Similarly at Nigeria’s tax agency, the Federal Inland Revenue Service, the Director of Public Communications, Emmanuel Obeta, who had earlier promised on three occasions to make information available on the matter suddenly had a change of mind. He said relevant officials who should provide him with the information sought were all not available.

From the foregoing, it is a sad commentary on the state of the Nigerian economy, as it has become so porous that multinational and international companies can just come in and rip the country of billions of revenue that ought to have contributed immensely to its growth and development. It is rather wicked and criminal that a company can perpetrate this level of economic fraud and sabotage on Nigeria over the years without any form of government intervention to checkmate it. 

CSNAC is therefore by this petition demanding that a full scale investigation be launched into the activities of MTN in view of its massive fraudulent tax activities, as well as the prosecution of any individual found to have participated directly or indirectly in this crime. This will go a long way in serving as deterrent and also send a strong message to would be economic fraudsters that Nigeria is no longer a haven for such criminal economic activities and that our economy will no longer be left at the mercy of economic saboteurs. 
Thank you in anticipation of your cooperation.

Yours faithfully,
Olanrewaju Suraju
Chairman
 

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