Could Nigeria be the new location for MTN headquarters?

Carel Gericke, MTN’s group executive for tax, has warned that the company could relocate its headquarters from South Africa to another country, due to the proposed withdrawal of tax credits on services charged granted to South African companies by the Treasury. The withdrawal is slated to take effect from January 1, 2016, and affects telecommunications, banking, and retailing companies. An increase in tax paid by companies in these sectors would be a result of the treasury’s proposal.

According to Gericke, South Africa was selected as the centralised service centre primarily because of the existence of the tax credit. The MTN centre would run at a loss if it were removed, and most multinational companies would no longer situate their headquarters in the country- a move the South African government wants.

Another result of the proposed withdrawal would be increased project costs for local service providers, which would in turn affect South Africa’s objective of becoming a regional services centre. Leon Coetzee, head of the Banking Association of SA’s direct tax committee, as well as other tax experts in the country have opposed the tax credit withdrawal, terming it as “unfair and inequitable”. Also, given the current situation of most African countries, the proposal to raise taxes has come at an inopportune time.

The Treasury defended its removal of the tax credit by stating issues such as the company’s abuse of it, noting that MTN is in violation of international tax rules and tax treaty principles. It also argues that it is a compliance burden for the South African Revenue Service (SARS).

MTN is the world’s 15th largest mobile telecommunications company, measured by subscribers, and it operates in many African, European, and Middle Eastern countries. Owing to this, Gericke’s threat to move headquarters to lower tax jurisdictions is not empty, as governments in these other countries would benefit from its presence.

Oscar Onyema, the Chief Executive Officer of the Nigerian Stock Exchange (NSE) suggested offering companies tax breaks in order to attract them to the country to do business. MTN Nigeria is the country’s biggest mobile network. Since its establishment, the government has made N1.3 trillion from the company. In December 2014, MTN Nigeria accounted for 11 percent of Nigeria’s non-oil revenue, five percent in total taxes. Also the company has spent over $56 million dollars (N11 billion) on various social responsibility projects since it began operations in Nigeria.

In Africa, MTN Nigeria leads in number of subscribers with 61.1 million as of the first quarter of 2015, and it contributes 19.7 percent of the total revenue earned by all MTN operations. The achievements of the multinational company’s subsidiary surely gives Nigeria a good candidacy position, in the event that South Africa is unable to house MTN due to the proposed tax hike, and if Nigeria is able to manage its 2016 budgets to accommodate mobile telecommunications.

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