The Federal High Court in Abuja’s Justice James Omotosho has invalidated Section 2(10)(b) of the National Broadcasting Code, 6th Edition, which mandated that broadcasters pay an annual operating levy equal to 2.5 percent of their “Gross Annual Income.”
Following a lawsuit against the National Broadcasting Commission (NBC) by MultiChoice Nigeria Ltd. and Details Nigeria Limited (GO TV), this ruling was rendered.
The rule should be repealed and replaced with “Net Annual Income” rather than the current “Gross Annual Income,” according to Justice Omotosho’s ruling on Wednesday.
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The court further prohibited the National Broadcasting Commission (NBC) from requesting the plaintiffs’ FIRS reports, trial balances, bank statements, audit adjustment journals, VAT remittance, and general ledgers in order to determine the plaintiffs’ yearly income, aside from the NBC Code’s requirements for the companies’ annual audited accounts.
According to the judgment, the Federal Inland Revenue Service (FIRS) and other sister organizations are the only ways for NBC to obtain MultiChoice’s additional financial records.
The plaintiffs’ attorney, Moyosore Onigbanjo, SAN, requested a number of reliefs in the lawsuit, including an answer to the question of whether NBC was authorized to request any financial records other the yearly audited accounts.
He also asked for clarity on the fairness and equity of the NBC Code’s use of the word “gross annual income.”
“The NBC Code 6th Edition does not define income, and neither does the NBC Act of 2004 or any of the earlier editions,” the attorney argued in court.
Additionally, Onigbanjo urged the court to decide whether the plaintiffs’ and NBC’s agreement to pay a fixed amount of N800,000,000 (eight hundred million naira) as the Annual Operating Levy for 2020–2023, including some prior years, was legally binding on both parties.
The NBC’s attorney, Victor Ogude SAN, contended before the court that the agreement did not bind the NBC because the acting Director-General who signed it did not have the authority to do so.
He argued that the NBC should be paid the entire sum owed.
Additionally, Ogude pleaded with the court to maintain NBC’s supervision of MultiChoice and Details Nigeria.
Given his background as a qualified economics instructor, Justice Omotosho stated in his ruling on Wednesday that operating a company similar to the plaintiffs’ demands a substantial investment of money and expenses. “It is only just that these costs be subtracted before the Annual Operating Levy is paid,” he stated.
According to him, net income is the actual profit after all business expenses are deducted. He also said that net profit should be used to calculate taxable income rather than gross profit.
The judge stressed that broadcasters are subject to a type of tax known as the NBC Annual Operating Levy.
Impeding it on their gross income, he believed, would be unfair.
He added that this is in line with international best practices and tax rules, saying that “the proper and lawful income to impose a levy on is the net income.” In the United States, for example, businesses pay a fixed rate of 21 percent on their profits, which is established after all costs have been subtracted. Similarly, in the United Kingdom, a 25% corporation tax is imposed on company profits.”
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“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.”
“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,” Omotosho added.
Regarding the agreement, Omotosho ruled that when parties express their intention and enter into a binding agreement, neither party is allowed to abandon the agreement simply because one or more of its terms are unfavorable.
The judge declared that the agreement between the defendant and MultiChoice, or the waiver on the payment of N800,000,000 (Eight Hundred Million Naira) throughout their current “DTH license”, is binding on both parties.
He also restrained the NBC from demanding any additional sum from the plaintiffs as AOL for the years in which they have already made payments.
He issued a perpetual injunction restraining the NBC, its servants, agents, or privies from sanctioning, fining, or suspending the plaintiffs’ license, contrary to the court’s judgment on the issues raised.
