In a move that marks a shift in Nigeria’s approach to regulatory and antitrust issues, the tax authorities of Osun and Delta states have imposed hefty fines on Google Nigeria and Meta Platforms Inc.
The tech giants have been fined $150 million and $200 million, respectively, for allegedly failing to remit withholding taxes (WHT) on payments to content creators and entertainers in these states from 2020 to the present.
This development comes on the heels of another major regulatory action by Nigeria’s Federal Competition and Consumer Protection Commission (FCCPC), which recently imposed a $220 million penalty on Meta Platforms Incorporated. The FCCPC’s penalty was based on allegations of discriminatory practices and the misuse of Nigerian consumers’ data, highlighting an increasing focus on antitrust and consumer protection issues in the country.
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Sola Adewunmi, the Executive Chairman of Osun State Internal Revenue Service (IRS), emphasized the importance of these measures, saying: “This move is not just about recovering unpaid taxes; it’s about ensuring that all companies, regardless of their size or global influence, comply with local laws and contribute their fair share to the economy.”
The fines were communicated through official letters signed by the executive chairmen of the Osun and Delta States IRS, alongside Ademola Odetunde, Chief Operating Officer of LafriquePromedia Ltd., the states’ designated revenue collection agent.
According to the letters, the companies have been accused of deducting withholding taxes from payments made to local content creators and entertainers but failing to remit these taxes to the state authorities.
The withholding tax, as defined by Nigerian law, serves as an advance payment of income tax that must be deducted at the source of payment for specific commercial transactions. These taxes should be remitted to the relevant tax authority within 21 days following the end of the month in which the transaction occurred.
The fines imposed on Google and Meta cover the period from 2020 to date, during which these companies allegedly did not comply with the remittance requirements.
Ademola Odetunde, speaking on behalf of the IRS, stated, “We observed that over the years, your companies willfully refused, failed, and neglected to remit the withheld tax to the local tax authority for Osun and Delta states, Nigeria.” He added, “The law permits us to prosecute the offending non-resident companies and take necessary steps to recover the WHT.”
The actions taken by Osun and Delta states, along with the FCCPC’s recent fine, signify a broader regulatory wakeup call in Nigeria. Historically, the country has been perceived as relatively lax in enforcing antitrust and tax regulations, particularly against large multinational tech companies.
However, recent events suggest a more assertive stance is being adopted.
Legal and Financial Implications
The financial penalties are significant, but the potential legal implications could be even more consequential. Under Nigerian law, the penalties for non-compliance include a 10% fine on the amount not deducted or deducted but not remitted, plus interest at the prevailing commercial rate, which is currently 21%.
Furthermore, officers of non-compliant companies may face prosecution, which could result in imprisonment, fines, or both if found guilty of tax evasion.
LafriquePromedia Ltd. has been in communication with both companies since October 13, 2023, but according to Mr. Odetunde, these efforts have not yielded the desired results. The companies have been given a 14-day notice period, starting from July 12 for Google and July 19 for Meta, to comply with the remittance requirements or face further legal actions.
The Regulatory Shift
The fines against Google and Meta are part of a broader trend of increased regulatory scrutiny of big tech companies globally. In Nigeria, these actions reflect a growing determination to enforce compliance with local tax and regulatory laws.
The recent actions by the FCCPC and state tax authorities suggest that Nigeria is moving towards a more stringent regulatory regime, particularly concerning the activities of multinational corporations in the digital and tech sectors.
The fines and regulatory actions are intended not only to recover lost revenues but also to send a clear message that compliance with local laws is non-negotiable.
“This incident is a wakeup call for all multinational companies operating in Nigeria,” said Solomon Ighrakpata, Executive Chairman of Delta State IRS. “It highlights the importance of adhering to local tax regulations and the consequences of non-compliance.”
The outcomes of these cases will likely influence future regulatory actions and set precedents for how multinational tech companies are treated across Nigerian states.