MultiChoice Prevails As Nigerian Court Strikes Down NBC’s 2.5% Gross Income Levy

In a landmark ruling, the Federal High Court in Abuja has nullified 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 (AOL). The judgment was delivered on Wednesday, November 27, 2024, following a suit filed by MultiChoice Nigeria Ltd and Details Nigeria Ltd (GOtv) against the National Broadcasting Commission (NBC).

Justice James Omotosho ruled that the levy should be calculated on Net Annual Income rather than gross income, emphasizing that deducting operational expenses before taxation is consistent with global best practices. He stated that taxing gross income without considering production costs, salaries, and other expenses was “unjust, unfair, and stifling.”

Omotosho likened the ruling to global tax systems, citing the United States’ 21% corporate tax on net profit and the United Kingdom’s 25% corporate tax, reinforcing the principle that levies should be imposed on actual profits.

The court also barred NBC from requesting MultiChoice’s VAT remittance, FIRS reports, bank statements, trial balances, and general ledgers. Justice Omotosho ruled that NBC could only access MultiChoice’s annual audited accounts as stipulated in the Broadcasting Code. Any additional financial documents must be obtained through relevant agencies like the Federal Inland Revenue Service (FIRS).

In suit FHC/ABJ/CS/652/2024, MultiChoice’s counsel, Moyosore Onigbanjo (SAN), challenged NBC’s authority to demand financial documents beyond audited accounts. He argued that the phrase “gross annual income” in the NBC Code was ambiguous and inequitable.

NBC’s counsel, Victor Ogude (SAN), contended that the commission was entitled to full payment and argued that a prior agreement to pay a flat AOL of N800 million for 2020–2023 was not binding. Justice Omotosho disagreed, ruling that agreements between parties must be honored and that the N800 million waiver was binding.

The court issued a perpetual injunction restraining NBC from fining, sanctioning, or suspending MultiChoice’s license for AOL issues related to the judgment. The judge also noted that NBC’s claim of a N4 billion debt was unsupported by evidence, stating that increasing subscription fees without proof of corresponding revenue hikes or reduced expenses was insufficient.

This ruling sets a significant precedent for the broadcasting industry, highlighting the importance of equitable taxation practices. MultiChoice’s ongoing legal battles with regulatory bodies, including a recent N150 million fine by a consumer tribunal, underscore the complex regulatory landscape for Pay-TV providers in Nigeria.

This decision reinforces the legal principle that levies must align with net income, ensuring fairness in the broadcasting sector. It also limits regulatory overreach, signaling a shift toward greater accountability for agencies like NBC in their dealings with broadcasters.