In a landmark judgment delivered by Justice James Omotosho of the Federal High Court in Abuja, the court struck down Section 2(10)(b) of the National Broadcasting Code (6th Edition), which mandated broadcasters to pay 2.5% of their Gross Annual Income as an Annual Operating Levy (AOL).
This ruling followed a legal challenge brought by MultiChoice Nigeria Ltd and Details Nigeria Limited (operators of GOtv) against the National Broadcasting Commission (NBC).
Justice Omotosho ordered the controversial provision to be replaced with “Net Annual Income” rather than the existing “Gross Annual Income” as the basis for calculating the levy.
The court further restrained the NBC from demanding sensitive financial documents such as VAT remittance records, Federal Inland Revenue Service (FIRS) reports, bank statements, audit adjustment journals, trial balances, and general ledgers from the plaintiffs for computing their income. Instead, the court ruled that only audited annual accounts, as stipulated in the NBC Code, should be used for this purpose.
The judge acknowledged NBC’s regulatory role but emphasized that accessing the financial documents of MultiChoice or GOtv outside the audited accounts must be done through relevant sister agencies like the FIRS. He also critiqued the fairness of demanding levies based on gross income without accounting for operational costs and expenses.
Drawing from his background in economics, Justice Omotosho underscored that imposing levies on gross income could be stifling for businesses.
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Gross income represents the total revenue earned without deductions, including essential business expenditures like production costs, staff salaries, rent, and vendor payments. He stated that only net income—calculated after all deductions—represents the actual profit available for taxation or levies.
To bolster his judgment, the judge cited global taxation standards. He noted that in the United States, businesses pay a flat 21% tax on net profits, while in the United Kingdom, corporate taxes are set at 25% on profits after expenses. Imposing levies on gross income, he argued, would be inconsistent with international best practices and unjustly burdensome for broadcasters.
Justice Omotosho also addressed a separate issue involving an agreement between NBC and the plaintiffs. MultiChoice had argued that it had a binding agreement with NBC to pay a flat rate of N800 million as its AOL for the years 2020–2023 and earlier. NBC had contested this, claiming the agreement was unauthorized.
The court ruled in favor of MultiChoice, declaring the agreement binding and enforceable. The judge stressed that once parties enter a valid agreement, neither can unilaterally withdraw from it simply because its terms seem unfavorable.
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The court issued a perpetual injunction restraining NBC from imposing additional levies or fines on MultiChoice and GOtv for the periods already covered by the payments under the agreement. The NBC was also barred from sanctioning or suspending the plaintiffs’ licenses based on the now-invalidated provisions of the NBC Code.
Justice Omotosho’s judgment is a significant victory for Nigerian broadcasters, as it sets a precedent for fairer regulatory practices. It also signals the importance of balancing regulatory oversight with the economic realities of businesses.
The ruling not only protects broadcasters from what the court deemed unfair levies but also reinforces the principle that regulatory authorities must act within the limits of their powers and adhere to agreements made in good faith.
This judgment could have broader implications for other regulatory frameworks in Nigeria, ensuring that businesses are not overburdened with levies or taxes that disregard operational costs.