MTN to fight R13bn bill after falling foul of Ghana’s tax collector

MTN is fighting a massive tax bill of as much as R13bn in Ghana after allegations by that country’s government that the mobile operator underdeclared its revenue by a third between 2014 and 2018.

This issue is likely to remind investors of MTN’s run-ins with authorities in Nigeria in the past five years. Those did not bode well for its investment case, but they were eventually resolved.

On Friday, MTN said the Ghanaian tax assessment was for about 8.2-billion cedi ($773m), which includes penalties and interest charges.

“MTN Ghana strongly disputes the accuracy and basis of the assessment, including the methodology used in conducting the audit,” the company said.

“MTN Ghana believes that the taxes due have been paid during the period under assessment and has resolved to defend MTN Ghana’s position on the assessment.”

The Ghana Revenue Authority (GRA) audited MTN Ghana using a third-party consultant as well as a new methodology based on call data records, recharges and other data.

MTN said it had co-operated with the three-year review process but was now disputing the GRA’s findings after a series of back and forth interactions during that time.

With the news having come after the close of trading on Friday, there was no reaction from the market. The share, down 17% over the past 12 months, closed 1.16% firmer on the day.

Ironically, the GRA gave an award to MTN in 2019 as one of the country’s largest contributors to its revenue collection.

In Nigeria, MTN has had to deal with several cases. In December 2018, the mobile operator was able to resolve an $8bn fine related to repatriated dividends. A $2bn tax bill was revoked in 2020 after MTN contested it.

But a trend appears to be taking hold where cash-strapped governments on the continent are using taxes and other regulations to bring in revenue from multinational companies that are seen to have deep pockets.

A number of SA firms are facing similar tax disputes elsewhere in Africa.

Vodacom is involved in a case in the Democratic Republic of Congo, where the government says it is owed $243m in taxes. According to Bloomberg, the disagreement relates to an audit for the years 2016 to 2019 done by the general directorate of taxes.

The Congolese government has sealed parts of Vodacom’s offices and frozen its bank accounts because of the dispute.

In Nigeria, MultiChoice and the country’s Federal Inland Revenue Service agreed in March 2022 to an amicable resolution of pending tax matters. These had led to a series of lawsuits related to a $4.4bn (R67.6bn) tax bill.

British oil group Tullow has reportedly been in dispute for several years over taxes at its Ghana subsidiary for an amount of more than $300m.

In addition to this latest dispute, in December, MTN Ghana had to deactivate about a quarter of its customers to comply with a directive from the West African country’s regulators on biometric registration.

At the same time, MTN Ghana in November reported slower growth in its fintech business after the implementation of new levies on mobile payments in the country.

MTN said Ghanaian authorities began the audit in 2019 “with the objective to give assurance on the reliability and completeness” of revenues declared by the Ghana business.

The GRA had not issued MTN Ghana with prior guidelines and standards relating to the new call data records methodology.

An initial tax assessment was issued in 2021 but was officially withdrawn after consultations between MTN Ghana, MTN Group, the finance ministry and the GRA. After the withdrawal, the parties agreed to an independent review by a global professional services firm. The review was unable to support the conclusions reached by the GRA’s third-party consultants as the basis for the assessment.

gavazam@businesslive.co.za