Court bars Nigerian regulator from collecting 2.5% of MultiChoice gross income

Court bars Nigerian regulator from collecting 2.5% of MultiChoice gross income

The Federal High Court in Abuja on Wednesday struck down Section 2 (10) (b) of the National Broadcasting Code, 6th Edition, which required broadcasters to pay 2.5% of their “Gross Annual Income” as an Annual Operating Levy.

This judgment followed a suit filed by MultiChoice Nigeria Ltd and Details Nigeria Limited (GO TV) against the National Broadcasting Commission (NBC).

Justice James Omotosho, while delivering the judgment on Wednesday, ordered that the provision be struck down and replaced with ‘Net Annual Income’ instead of the existing ‘Gross Annual Income.’

The court also barred the National Broadcasting Commission (NBC) from demanding the plaintiffs’ VAT remittance, FIRS reports, bank statements, audit adjustment journals, trial balances, and general ledgers for the purpose of computing the plaintiffs’ annual income, other than the annual audited accounts of the companies as stipulated in the NBC Code.

The judge stated that the NBC can only access the other financial documents of MultiChoice through sister agencies such as the Federal Inland Revenue Service (FIRS).

He stated that net income is the actual profit after subtracting all business expenses, adding that the taxable amount cannot be determined when calculating gross profit but should be based on net profit.

The judge emphasized that the Annual Operating Levy charged by the NBC is a form of tax imposed on broadcasters.

He held that it would be unjust to impose it on their gross income.

“The proper and lawful income to impose a levy on is the net income,” he said, adding that this aligns with tax laws and global best practices.

“In the United States, for instance, companies pay a flat rate of 21% on their profits, determined after all expenses have been deducted.

Similarly, in the United Kingdom, a 25% corporation tax is imposed on company profits.”

“From this Court’s knowledge of economics, gross income implies all money that accrues to a person or business within a specific time.

“This gross income typically does not account for company expenditures such as production costs, rent, vendor payments, staff salaries, taxes, and other costs. It is only after all these payments are made that the company determines its profit, known as net income.”

MultiChoice has faced accusations from various agencies and Nigerian customers.

Over the years, the Pay-TV provider has been scrutinized by lawmakers and consumer protection tribunals over its pricing practices.

This year, a tribunal fined MultiChoice 150 million Naira and mandated a one-month free subscription for violating interim orders.

However, MultiChoice appealed and filed for a stay of proceedings.

The tribunal rescheduled the case to November, but the lawyer who sued the Pay-TV company chose to withdraw the suit, which the tribunal approved without awarding costs.