Tackling the Multiple Taxation Debacle in Telecom Sector

One of the major challenges bedevilling the Nigerian telecom sector is the issue of multiple taxation and despite ceaseless outcry by operators, it seems nobody is ready to listen and look into the situation. Perhaps the much touted success of the sector over the last 10 years given the geometrical growth of the market is somewhat a blessing turned sour. Governments at all levels are now seeing the telecom operators as cash cow, with each bringing its own charges and levies for one right or the other.

Currently, in addition to the statutory taxes levied on operators, telecommunications operators pay Annual Operating Levy (AOL) of certain percentage of earnings to the Nigerian Communications Commission (NCC) and are required in addition to pay various rates and charges to other Federal Government agencies like the Consumer Protection Council, Nigeria Lottery Commission, federal and state ministries of environment including authorities in every state and local Government in which they operate.

Besides, telecoms operators had in the past six years, been unable to erect telecoms base stations in Abuja and its environs, following refusal of some government agencies and community members who insisted that telecoms operators must pay certain – very huge – levies before they could be allowed to erect telecoms masts to give services to the public; a public that is rightly demanding quality telecom services.

On the other hand, the Ministry of Environment at the Federal Capital Territory (FCT) had refused granting telecoms operators the licence to build and erect telecoms masts in Abuja and its environs, a situation that has contributed immensely to poor quality of service in the locations.

The implication of this, apart from the impact on the quality of service is a tell tale sign of unfavourable business environment which may further discourage foreign investments which the Federal Government is clamouring for. This again impinges on the operators’ ability to create new jobs due to high operating costs, while it also slows down economic growth. For the operators, we have seen many die prematurely due to the harsh operating environment. Outside the telecom sector, we have seen many companies relocate to other neighbouring countries where their tax system is more business-friendly.

However, recent statements made by the Deputy Chairman House Committee on Communications, Honourable Usman Bawa have brought a glimmer of hope in ending multiple taxation in the sector. For once, a government official was recognising the fact that the operators are being taxed unnecessarily with a promise that the situation would be addressed by the lower chamber of the legislative arm.

According to him, the Committee was not unaware of the various challenges facing the operators, especially in Abuja, where they have been prevented by the Ministry of Environment from building additional base stations, adding that the lawmakers would address the issue through an Act that would make government agencies and other individuals see telecoms equipment as critical national security infrastructure.

"Our Committee has received reports on multiple taxation and the refusal by government agency to grant approval for the erection of telecoms masts in Abuja and its environs. We have held meetings with the Nigerian Communications Commission (NCC), the telecoms industry regulator on the issue. We have also held meetings with the Ministry of Environment, and we are currently working with the ministry to address the issue. We desire good quality of service from telecoms operators and we need to provide the enabling environment for the operators to thrive in their telecoms service offerings," Bawa had said.

While still awaiting the actions to be taken by the Committee as promised, we must commend the courage of the Deputy Chairman for decrying the current situation. Suffice to say that the only way there can be a change is for the committee to take appropriate actions.

Of course, it is not abnormal for government to tax businesses to generate revenue —telecoms companies inclusive, which is the practice all over the world. However, a situation where there are indiscriminate charges from different quarters, both legal and illegal, is highly deplorable and antithesis to growth. Against this backdrop, the House Committee on Communications would be doing this country a great service if it actually pursues this to a logical conclusion to achieve a streamlined tax payment system.

For the country to have healthy operations in the telecom sector there must be certainty in rates and certainty in the mechanism of collection. Rates should be as enshrined in statutes and government, rather than tax consultants, should collect taxes to remove any additional burden on the tax payers. There is also the need for intensive public education and stakeholder engagement for better understanding of issues and consequence of existing practices; such education should focus for example on the impact and long term effect of multiple taxation on the economy and businesses in particular.

Going forward, efforts must be made to put an end to unscrupulous demands by village chiefs and touts who see installation of telecoms equipment by operators as opportunity to also get their own share of the telecom ‘largesse’. The Act to be enacted, as being proposed by the House Committee, must take into consideration the need for telecom infrastructure to be seen as critical national infrastructure. The lawmakers should also look at the roots of other challenges facing the telecom sector with a view to fashioning out ways of addressing them, not the least electricity and security.