Multichoice Floors NBC At Federal High Court

Multichoice Nigeria Limited has floored the Nigeria Broadcasting Commission (NBC) over the latter’s move requiring broadcasters to pay 2.5% of their “Gross Annual Income” as an Annual Operating Levy.

This followed MultiChoice Nigeria Ltd and Details Nigeria Limited (GO TV) dragging the NBC before the Federal High Court to intervene on the matter.

In suit number FHC/ABJ/CS/652/2024, the plaintiffs’ counsel, Moyosore Onigbanjo, SAN, sought several reliefs, including a determination of whether the NBC had the authority to demand any financial documents other than the annual audited accounts.

He also sought clarification on whether the term “gross annual income,” as used in the NBC Code, was fair and equitable.

“Income, as provided by the NBC Code 6th Edition, is not defined, nor is it defined in any previous editions or in the NBC Act of 2004,” the counsel submitted in court.

Onigbanjo also asked the court to determine whether the waiver or agreement between the plaintiffs and the NBC to pay a flat rate of N800,000,000 (Eight Hundred Million Naira) as an Annual Operating Levy for the years 2020–2023, including certain previous years, was binding on both parties.

In its ruling on Wednesday the court struck down the relevant portion of the law, 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.

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

It also stopped the NBC forthwith from demanding from demanding VAT remittance, Federal Inland Revenue Service (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 NBC can only access the other financial documents of MultiChoice through sister agencies such as the Federal Inland Revenue Service (FIRS).

Earlier, Counsel to the NBC, Victor Ogude SAN, had argued that the agreement was not binding on the NBC, as the NBC’s acting Director-General who entered into the agreement on its behalf acted beyond his powers.

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He contended that the NBC was entitled to the full amount payable.

Ogude also urged the court to uphold NBC’s oversight role over MultiChoice and Details Nigeria.

After listening to the two sides, Justice Omotosho, said

“The proper and lawful income to impose a levy on is the net income

“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.”

He also referenced from his experience as a trained economics teacher, submitting that running a business like the one operated by the plaintiffs requires significant capital and expenses, and that it would only be fair for such expenses to be be deducted before the Annual Operating Levy is paid.

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According to him, the Annual Operating Levy charged by NBC is a form of tax imposed on broadcasters.

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

“Consequently, this Court holds that Section 2 (10) (b) of the National Broadcasting Code, 6th Edition, which demands 2.5% of Gross Annual Income from broadcasters as an Annual Operating Levy, is unconscionable, unfair, and stifling to the plaintiffs,” Omotosho ruled.

Furthermore, Omotosho noted that the plaintiffs had provided credible and documentary evidence showing they had faithfully paid their Annual Operating Levy (AOL) without fail, and the defendant did not challenge these documents.

He said the NBC’s claim that it was entitled to N4 billion, as stated in its letter dated August 15, 2023, was unsupported by any evidence.

“Simply basing its claim on the fact that the plaintiffs increased their subscription fees is grossly insufficient. First, there is no evidence before the court that subscription fees were increased. Second, the defendant failed to consider that the plaintiffs may have increased their production costs or incurred additional expenses.

“This Court refrains from speculation as the defendant has invited it to do,” the judge ruled.