Section 2(10)(b) of the National Broadcasting Code, 6th Edition, which mandated that broadcasters pay 2.5% of their “Gross Annual Income” as an Annual Operating Levy, has been overturned by Justice James Omotosho of the Federal High Court in Abuja.
This ruling came after the National Broadcasting Commission (NBC) was sued by MultiChoice Nigeria Ltd. and Details Nigeria Limited (GO TV).
In his ruling on Wednesday, Justice Omotosho mandated that the clause be invalidated and that “Net Annual Income” be used in its place, rather than the current “Gross Annual Income.”
Aside from the yearly audited accounts of the companies as required by the NBC Code, the court also prohibited the NBC from requesting the plaintiffs’ FIRS reports, bank statements, trial balances, audit adjustment journals, general ledgers, and VAT remittance in order to determine the plaintiffs’ yearly income.
According to the judge, NBC can only obtain MultiChoice’s other financial records via sibling organizations like the Federal Inland Revenue Service (FIRS).
Moyosore Onigbanjo, SAN, the plaintiffs’ attorney, requested a number of reliefs in the lawsuit, including an answer to the question of whether NBC had the right to request any financial records other the yearly audited accounts.
In addition, he wanted to see if the NBC Code’s definition of “gross annual income” was just and fair.
The attorney argued in court that “income, as defined by the NBC Code 6th Edition, is not defined, nor is it defined in any previous editions or in the NBC Act of 2004.”
Onigbanjo further requested that the court decide whether the plaintiffs’ and NBC’s agreement to pay a fixed annual operating levy of N800,000,000 (eight hundred million naira) for 2020–2023, including some prior years, was legally binding on both sides.
Victor Ogude SAN, the NBC’s attorney, contended in court that the arrangement did not bind the NBC since the acting Director-General, who signed it on its behalf, had overreached himself.
He argued that the entire money owed should go to the NBC.
Ogude also asked the court to maintain NBC’s supervision of Details Nigeria and MultiChoice.
As a qualified economics teacher, Justice Omotosho stated in his ruling on Wednesday that operating a firm such as the plaintiffs’ demands a substantial amount of money and expenses. He stated that it is only just that these costs be subtracted prior to the payment of the Annual Operating Levy.
After deducting all business expenses, he said, net income is the true profit. He said that the taxable amount should be based on net profit rather than gross profit.
The judgment underlined that the NBC Annual Operating Levy is a type of tax levied against broadcasters.
He believed that applying it to their gross income would be unfair.
“The net income is the appropriate and legal income to levy on,” he stated, adding that this is in line with international best practices and tax legislation. For example, businesses in the US pay a flat rate of 21% on their profits, which is calculated after all costs have been subtracted. Similar to this, corporation profits in the UK are subject to a 25% corporation tax.
Based on the Court’s understanding of economics, gross income is the total amount of money that a person or business makes over a certain period of time. Production costs, rent, vendor payments, employee wages, taxes, and other expenses are usually not included in this gross income. The business only calculates its profit, or net income, after all of these payments have been made.
As a result, Omotosho declared that Section 2 (10) (b) of the National Broadcasting Code, 6th Edition, which requires broadcasters to pay 2.5% of their gross annual income as an annual operating levy, is unjust, unreasonable, and oppressive to the plaintiffs.
Omotosho also pointed out that the defendant did not contest the plaintiffs’ reliable and documented proof that they had consistently and diligently paid their Annual Operating Levy (AOL).
According to him, there was no proof to back up NBC’s assertion in its letter dated August 15, 2023, that it was entitled to N4 billion.
It is egregiously inadequate to base its claim only on the plaintiffs’ raising their subscription prices. First, the court is not presented with any proof that subscription fees were raised. Second, the defendant did not take into account the possibility that the plaintiffs had incurred extra costs or raised their manufacturing costs. Because the defendant invited it to do so, this Court abstains from speculating,” Omotosho continued.
When parties state their purpose and enter into a legally binding agreement, Omotosho held that neither party may back out of the agreement just because one or more of its provisions are undesirable.
The judge ruled that both parties must abide by the agreement between the defendant and MultiChoice, which waives the payment of N800,000,000 (eight hundred million naira) for the duration of their existing “DTH license.”
Additionally, he prevented NBC from requesting any more money from the plaintiffs, AOL, for the years in which they had already paid.
In contrast to the court’s ruling on the matters addressed, he granted a perpetual injunction prohibiting the NBC, its employees, agents, or privies from approving, fining, or suspending the plaintiffs’ license.
