MultiChoice Secures Landmark Victory as Court Overrules NBC’s 2.5% Gross Income Levy
In a pivotal judgment, the Federal High Court in Abuja has invalidated Section 2 (10) (b) of the National Broadcasting Code, 6th Edition, which mandated broadcasters to remit 2.5% of their Gross Annual Income as an Annual Operating Levy (AOL). The case, brought by MultiChoice Nigeria Ltd and Details Nigeria Limited (operators of GOtv), challenged the fairness of this provision imposed by the National Broadcasting Commission (NBC).
Justice James Omotosho, delivering the verdict, ordered that the levy should be based on Net Annual Income rather than gross income. He described the existing provision as stifling, unjust, and inconsistent with global best practices.
Key Highlights of the Case
- Background
MultiChoice, represented by Moyosore Onigbanjo, SAN, contested the NBC’s demand for financial documents beyond audited accounts, arguing that the term gross annual income was neither defined nor equitable under the NBC Act of 2004. - Court’s Findings
Justice Omotosho stated that determining a levy based on gross income ignored essential business expenditures such as production costs, staff salaries, and taxes. He emphasized that net income, calculated after deducting expenses, provides a fairer basis for taxation.Citing international tax standards, he remarked:
- In the U.S., corporations pay a flat 21% tax on profits.
- The U.K. imposes a 25% corporation tax on profits.
- Judgment
- Section 2 (10) (b) of the NBC Code was declared “unconscionable” and struck down.
- The court barred the NBC from demanding VAT remittances, bank statements, or other financial documents except for annual audited accounts.
- NBC was instructed to access such records only through relevant agencies like the Federal Inland Revenue Service (FIRS).
- Agreement Binding
Justice Omotosho upheld a prior agreement between MultiChoice and the NBC to pay a flat rate of N800 million annually for specific license years. He ruled that neither party could renege on this agreement.
Implications for the Broadcasting Industry
This judgment offers relief to broadcasters who have long argued that gross income levies fail to account for operational challenges and costs. By affirming the need for net income as the taxable base, the court has set a precedent for fairer taxation practices in Nigeria’s broadcasting sector.
Additionally, the ruling underscores the importance of adhering to binding agreements and limits overreach by regulatory bodies.
What You Should Know
The case highlights ongoing tensions between MultiChoice and Nigerian regulators over pricing practices and compliance. Despite previous fines and consumer complaints, this victory underscores MultiChoice’s commitment to challenging perceived injustices in regulatory practices.
Justice Omotosho’s verdict ensures that broadcasters are taxed equitably, fostering a more sustainable operating environment for the industry.
