Court bars NBC from demanding Pay-TV’s VAT records, declares gross income levy unfair

In a landmark judgment, the Federal High Court in Abuja has invalidated 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 decision, delivered by Justice James Omotosho, marked a significant victory for MultiChoice Nigeria Ltd and Details Nigeria Limited (operators of GOtv) against the National Broadcasting Commission (NBC).

Justice Omotosho ruled that the levy should be based on net annual income—the profit remaining after deducting all expenses—rather than gross income.

He described the gross income levy as “unconscionable, unfair, and stifling.” The court also restrained NBC from demanding other financial documents, including VAT remittances, FIRS reports, and bank statements, beyond annual audited accounts.

The judge explained that calculating levies based on gross income failed to consider the substantial operational costs incurred by broadcasters, rendering the policy inequitable.

“It is unjust to impose a levy on gross income, which does not account for expenses like staff salaries, production costs, and taxes. Tax laws and global best practices, such as in the U.S. and U.K., base similar charges on net income,” Omotosho stated.

He emphasized that the levy imposed by NBC is effectively a form of taxation, which should adhere to principles of fairness and economic sustainability.

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The case, filed under suit number FHC/ABJ/CS/652/2024, challenged NBC’s authority to impose levies on gross income and to demand financial records beyond what the broadcasting code permits.

MultiChoice’s counsel, Moyosore Onigbanjo, SAN, argued that the levy on gross income lacked a legal definition in the NBC Code or its governing Act. He also sought a declaration that a prior agreement to pay a flat rate of ₦800 million as AOL for specific years was binding on both parties.

NBC’s counsel, Victor Ogude, SAN, countered that the agreement was invalid, as it exceeded the acting Director-General’s authority. He argued that NBC was entitled to recover its perceived full dues.

In his ruling, Justice Omotosho upheld the validity of the ₦800 million agreement, stating:

“When parties express their intentions in a binding agreement, neither party can unilaterally abandon it simply because some terms become unfavorable.”

The court issued a perpetual injunction preventing NBC from demanding additional sums for previously covered years or penalizing MultiChoice contrary to the judgment.

The ruling marks a critical moment for broadcasters in Nigeria, challenging the NBC’s regulatory reach and financial demands. Analysts have lauded the judgment as a move toward regulatory fairness.

Dr. Emmanuel Okafor, a media law expert, described the verdict as “a progressive step toward ensuring broadcasters are not overburdened by arbitrary levies.” He noted that the judgment reinforces the principle of fair taxation while safeguarding broadcasters’ operational viability.

MultiChoice has faced intense scrutiny from lawmakers and tribunals in recent years, particularly regarding pricing practices.

Earlier this year, a consumer tribunal fined the Pay-TV provider ₦150 million and ordered a one-month free subscription for non-compliance with interim orders. The company’s appeal of this decision underscores its broader legal battles with regulatory authorities.