By NBF News
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Minister of Information and Communications, Prof. Dora Akunyili

Experts say finding a lasting solution to the problem of multiple and illegal taxation will enhance growth in the telecoms sector. DAYO OKETOLA reports.

Since the liberalisation of the market in 2003, Nigeria's telecoms industry has experienced exceptional growth rates. It grew by 23 per cent in dollar value in 2008 and generated $8.4bn in overall telecoms service revenue, which is expected to increase at a 5.7 per cent rate, from $8.42bn in 2008 to $11.14bn in 2013.

Despite this bright outlook, the industry has been confronted by a number of problems, including erratic power supply, acts of vandalism, and security. More disturbingly, multiple taxation has been considered as a bane of growth in the telecoms sector.

Heavy taxes imposed on telecoms companies at the federal, state and local government levels, according to experts, have been a major obstacle, which retards economic growth, limits profits, compromises quality of service and slows network expansion.

They argue that the situation in which telecoms companies are taken as cash cows is deplorable; adding that telecoms business attracts high operating cost and multiplicity of taxes by tiers of government affects profits of the operators and compromises quality of service.

The Federal Government has, over the years, been inundated with complaints from different sectors of the economy about multiplicity of taxes. The telecoms operators and members of the Manufacturers Association of Nigeria have been particularly active in this regard.

In what seems as part of efforts to tame the multiple taxation problem in the country, the Federal Executive Council on January 20, 2009 adopted a draft National Tax Policy for Nigeria, which was expected to grow tax revenue at all tiers of government, enhance government revenue from non-oil tax and also increase transparency and accountability in tax management.

The policy was also to provide a new set of guidelines, rules and modus operandi that would regulate Nigeria's tax system and provide a basis for tax legislation and administration in the country. Most importantly, the policy was aimed at curbing multiple taxation.

According to Blackfriars LLP, in a Nigeria Telecommunication Law newsletter article, titled, 'Nigerian Telecommunications Sector and the Tax Regime', 'There is an emerging school of thought that the huge opportunities that abound in Information and Communications Technologies in Nigeria are being retarded by multiple taxation from governments. Indeed, while tremendous progress and growth has been recorded in the ICT and telecoms sectors, multiple taxation and the attendant ripple effects on pricing for telecoms services may be implicated in poor service provisioning in Nigeria.'

Experts also believe that high taxation is responsible for the slow pace of digital penetration and connectivity in the rest of sub-Saharan Africa. According to GSM Association, an organisation of more than 700 mobile phone operators in more than 220 countries, supported by over 178 equipment manufacturers, mobile telephony taxations in sub-Saharan Africa account for 35 per cent of revenues of mobile operators in Nigeria.

Globally, telecommunications industry is one of the most taxed economic sectors and the same is true of Africa. African governments, according to findings, will earn an estimated $71bn in tax revenues paid by mobile operators by 2012. It was also estimated that an additional 43 million people could get connected by 2012, leading to an increase of $930m in tax.

Aside high taxation, however, the issue of multiple taxation from all tiers of government in the telecoms sector has been a major source of concern for operators.

Some weeks ago, the Association of Licensed Telecommunications Operators of Nigeria took their grievances to the 122nd meeting of the Joint Tax Board in Abuja on the burden of multiple taxation imposed on its members by the three tiers of government. The group specifically bemoaned the harassment of its members by thugs who posed as tax officials for the states as well as local government councils.

Alton Chairman, Mr. Gbenga Adebayo, who urged the board to be specific on the type of taxes stipulated by laws for companies to pay, said, 'ALTON once again brings to the attention of the JTB persistent attempts by certain states and local government authorities to impose multiple and unjustifiable taxes and levies on our members in their respective jurisdiction. This development threatens the laudable efforts of our members to make further substantial investments on their respective networks and provide world class telecommunications services in Nigeria. ALTON respectfully seeks the intervention of the JTB in addressing these incidences of multiple taxation.'

He noted that when the members refused to pay these levies, the affected states and local authorities resorted to closure of their facilities. This according to him, has impacted on network availability, quality of service and the finances of the companies.

Adebayo further noted that the Police and thugs, who supported the drive of the multiple tax imposers made it difficult to resist them.

'Unfortunately, and contrary to all known norms, these local authorities utilise the services of the Police and thugs to drive their demand; making it difficult and most times, impossible to engage them meaningfully,' he said.

Adebayo cited an instance where one state was demanding N200m as advert levies and another local government was demanding N18.6m each year for operation levy, office location permit, development levy and ground rent from 2002 to 2009.

The Chief Operating Officer, Globacom, Mr. Mohammed Jameel, recently said the problem of multiple taxation was one of the major impediments to tariff reduction. He listed some of the problems confronting the company to include erratic power supply, vandalisation of existing infrastructure, security and lengthy processes at all levels of government. The problem of multiplicity of taxes from the various tiers of government, according to him, is particularly worrisome.

The President, Association of Telecommunications Companies of Nigeria, Mr. Titi Omo-Ettu, last week, said that the telecoms industry was distressed as against the popular, but false belief that telecoms firms were making excessive profit.

According to him, it is the false belief that makes everybody, including state and local governments to impose frivolous, unfair and sometimes illegal taxes on telecoms firms.

At a recent interactive section convened by the Ministry of Information and Communications, Zain's representative at the gathering expressed sadness over the multiple taxation and harsh treatment meted to the company by the local government and state officials; adding that about 14 of the company's base stations were shut in Rivers State over taxes.

Though, the Minister of State for Information and Communications, Mr. Labaran Maku, insists that taxes must be paid, operators believe that the telecoms sector will perform better if illegal taxes are abolished.

It had been argued that if governments of sub-Sahara African countries could lift taxes on ICTs, it would greatly reduce the operation cost of the operators, lessen exploitation, improve access to ICT solutions by the people, enhance improved quality service as well as catapult the economy since it would affect every sector of the economy.

The newly appointed Executive Vice Chairman, Nigerian Communications Commission, Dr. Bashir Gwandu, who spoke with our correspondent on the telephone on Saturday, noted that the only way to avoid harassment by tax officials was to talk to governments of the states where illegal multiple taxation was being imposed.

In this regard, The Chairman of the JTB, Mrs. Ifueko Omogui-Okauru, who responded to the plea of ALTON at the 122nd JTB meeting in Abuja, was quoted as saying that the Federal Government would do a state by state situation analysis of what was going on in each state as regards the issue of multiple taxation.

She said, 'Truly, it is a matter of national security and we really need to provide all the support that we can give to all of the members of the private sector because the situation is so bad that it is actually pushing organisations to leave Nigeria and relocate elsewhere. It is actually pushing organisations to retrench staff because of the high cost of doing business. So, with these, we know we really have a major problem. There will be no multiple taxation because I can assure you that as I stand, as the board stands and as government stands, multiple taxation is a no-go area, it does not help business, businesses are closing because of multiple taxation.'

However, to the Chairman, Teledom Group, Dr. Emmanuel Ekuwem, who also spoke with our correspondent on the telephone on Saturday, 'Government decision to harmonise the taxes in the country is desirable, particularly for telecoms operators. However, we understand that adopting and implementing such a policy in a democratic situation could be creatively slow as it has to pass through the National Assembly, FEC and so on. The implication is that operators will make more profits if taxes are harmonised.'

The President, National Association of Telecoms Subscribers, Chief Deolu Ogunbanjo noted that subscribers appreciated low tariff structure, adding that he expected that the new tax policy, if implemented, would ensure low tariffs in the telecoms sector.

He said, 'We support a one stop tax payment system because we know it will curb multiple taxation in the telecoms industry. In 2007, there was a Federal High Court judgement, which said that telecoms operators should pay only one tax but implementation is the problem.

'If the new National Tax Policy is passed into law, legislation will be in place and it will be difficult for multiple tax imposers to operate. Above all, telecoms companies will make more profits, provide quality services and also reduce tariffs.'

Meanwhile, the NCC has announced that active connections in the Nigerian telecoms market peaked at over 78.8million lines at April, 2010 with the GSM mobile sector accounting for traditional market dominance with over 85.5million lines. The mobile CDMA sector exceeded 10.5million lines while the fixed wired/wireless sector accounted for 2.5million lines within the period.

While the prospect of government revenue through taxation in the telecoms sector continues to be high, experts say if illegal taxes are removed, growth in the telecoms and ICT sector as a whole will be maximised.