Dangote, Nigerian government explore out-of-court settlement in $1.5m tax dispute

Dangote Cement, owned by Nigerian billionaire businessman Aliko Dangote, approached the Tax Appeal Tribunal in Lagos in 2024 to challenge a N2.2bn ($1.5mn) tax demand issued by the Federal Inland Revenue Service (FIRS), since renamed the Nigeria Revenue Service.

According to the revenue agency, a total of N2,245,619,707 represents Dangote Cement’s tax liabilities for the fiscal years 2016, 2017 and 2018. Dangote Cement disputes the assessment, arguing that the plants designated for the tax obligation were within their first four years of production and therefore exempt from tax under Nigerian law.

The company said the facilities assessed by the FIRS “were under pioneer status, granted by the President of the Federal Republic of Nigeria through the Nigerian Investment Promotion Commission”.

Buhari’s tax incentives

Under former president Muhammadu Buhari, Dangote’s conglomerate benefited from significant tax incentives. In 2019, Buhari signed Executive Order 007, which allows companies to build public infrastructure in exchange for tax credits.

In 2021, the Dangote Group received N22.32bn in tax credits for building the Apapa-Oworonshoki-Ojota expressway in Lagos and the Lokoja-Obajana-Kabba road spanning Kogi and Kwara states.

In its submission before the tribunal, the company argued that the tax authority “erroneously assessed taxes for Benue Plant and Obajana Lines 1 and 2, which were in the first four years of commencement of business between 2016 and 2017, while Obajana Line 3 and Ibese Lines 1 and 2 commenced operations between 2017 and 2021”.

It further argued that the tax authority “erroneously raised the notices of assessment without cognisance of the provisions of Section 29(3) and Section 33 of the Companies Income Tax Act and Section 11(b) of the Industrial Development (Income Tax Relief) Act”.

‘Acting in bad faith’

Dangote Cement also accused the tax agency of acting in bad faith, alleging it hurriedly issued “piecemeal assessment and demand notices” without giving the company adequate time to submit its filings. “The timeframe required to submit the details was unnecessarily aggressive, malicious and in bad faith and created a hostile and toxic practice environment,” the company said.

It asked the tribunal to set aside or nullify the “piecemeal notices of assessment and demand notices”. However, the revenue agency has rejected the allegations, insisting it did not act maliciously or in bad faith.

Contrary to Dangote Cement’s claim, the agency said it did not assess plants within their first four years of production but rather audited Dangote Cement Plc, which was incorporated and began operations in 1992.

“The income subjected to minimum tax is from non-pioneer income from the plant, which had previously enjoyed five years of tax holiday,” the agency said. It added that Benue Plant, Obajana Lines 1 and 2 and Ibese Lines 1 and 2 were not regarded as separate companies but as production lines.

“Tax is stricto sensu, an imposition by a public authority – whether federal or state – and it is mandatory, not conditional,” the agency said.

After nearly two years of litigation, Dangote Cementand the government are exploring the possibility of settling the dispute out of court. Both parties previously appeared before the tribunal on 26 February to report on settlement discussions and requested additional time to continue negotiations. (The Africa Report)