(Ecofin Agency) - The Lagos State Tax Appeals Tribunal has ordered MTN Nigeria to pay $72.5 million in tax arrears to the Federal Inland Revenue Service (FIRS). This amount covers the period from 2007 to 2017. The verdict was pronounced following an appeal by the local subsidiary of the South African telecoms group.

The dispute began in May 2018, when the Federal Attorney General's Office published a report on certain tax returns made by MTN Nigeria for the financial years 2007 to 2017, particularly concerning VAT and certain withholding taxes. In July 2021, FIRS issued an initial VAT assessment of $93.6 million against MTN, including $72.55 million as principal and $21.04 million for penalties and interest.

MTN contested this assessment and a revised one was issued on April 14, 2022, bringing the amount to $135.7 million. Although the principal amount of tax due was reduced to $48 million, interest and penalties increased to $87.9 million. Subsequently, the company appealed to the Tax Appeal Tribunal. After review, the tribunal ruled in favor of the Lagos tax authorities in collecting the principal amount of $72.5 million and canceled the penalties in MTN's favor.

This amount is not unbearable for MTN Nigeria, which ended the first half of 2023 with a free cash flow of almost 500 billion naira ($632 million). However, it should be noted that this sum is far greater than the overall provisions made by the company for possible unfavorable court rulings, which at the start of the year stood at just 22 billion naira.

This is not, however, likely to pose a risk to the company's performance on the Lagos Stock Exchange, where it is listed. Its share price has gained 26.9% since the beginning of the year, according to data consulted by Ecofin Agency. Net income per share halved in the second quarter, but MTN Nigeria's growth prospects continue to attract investors.

Although the MTN Group is the dominant shareholder in its Nigerian subsidiary, with a 70.7% stake, big names like BlackRock are also shareholders. Mazzi Asset Management, an all-black South African investment firm, has increased its stake to become the second largest institutional shareholder with 16.5 million shares.