The NITDA Bill and Tax Multiplicity
By Reuben Mbaka
Monday, May 9, 2005

Information Technology is the new magic wand for getting
by in the world of intricacies.  So complex is the world now that the key to a fruitful future is information technology.  The Federal Government seems to have embraced this reality by introducing the National Information Technology Development Bill.  The Bill, which is still before the National Assembly, is intended to give effect to the 2001 National Information Policy.  If passed, the law will give legal teeth to the establishment and operation of the National Information Technology Development Agency (NITDA), which is already in existence.

The objectives of the Bill include ensuring the practical implementation of the Information Technology Policy of the government and the use of IT for Education; Poverty Eradication, Job Creation, Global Competitiveness, Wealth Creation, among others.  According to Sections 7 and 8, the Agency is expected to facilitate the establishment and development of appropriate infrastructure for IT in Nigeria. It would also encourage and accelerate the use of electronic data interchange in government, educational institutions and business. It would develop and monitor guidelines for certification of digital signature and e-commerce encryption services, render advisory services in all IT matters to both public and private sectors, promote the use of parks, recommend appropriate policies regulation and legislations to government and encourage, undertake and participate in R & D activities.

This provision gives effect in detail to the provisions of the National Information Technology Policy, which was approved in March 2001.  Furthermore, Section 8 gives the Board the power among others, to “manage the National Information Technology Development Fund, established under Section 14 of the Act”.  However, Sections 15 and 16 of the Bill create a seven-member Board of Trustees to also “manage and disburse the fund for the purpose specified therein.”

Sections 3,4,5 & 6, of the Bill which states that the Agency has a governing board which includes the Federal Ministry of Science and Technology, Federal Ministry of Defence, the Federal Ministry of Education, Federal Ministry of Commerce, the NCC, the Computer Professionals Registration Council of Nigeria, the Computer Association of Nigeria, the Information Technology (Industries) Association of Nigeria, among others, have been faulted by industry watchers. They say the 18-member board is rather too large and therefore recommend a smaller board comprising 10 persons representing key interests in the IT industry and government agencies with more of private sector members.  This is in line with the saying that too many cooks spoil the broth – an unwieldy board is a recipe for inaction.

Care also needs to be taken to ensure that there is a clear definition of roles between the National Communications Commission (NCC) and the National Information Technology Development Agency, especially in relation to the provision of Internet services in rural and under-served areas. This is one of the objectives of the universal service board established under the Nigerian Communications Act 2003.
Analysts and industry watchers believe that the creation of another Board of trustees for the purpose of managing the fund is unnecessary and may cause friction between the Governing Board and the Trustees.
Similarly, the NITDEF Board has representatives from all the agencies represented on the NITDA Board, except the Federal Ministry of Finance.  This conflict of roles needs to be resolved because of the huge cost of running and maintaining two separate boards, which tends to reduce the resources available to the agency for the discharge of its core functions. Government tends to have over-bloated workforce at the expense of development.  During his first term in office, President Olusegun Obasanjo, told an astonished country that 85 per cent of Federal revenue was being spent on recurrent expenditure, with a meagre 15 per cent, available for capital development.   Analysts are saying that the provisions relating to the creation of the Board of Trustees needs to be deleted from the Bill and its functions transferred to the government Board. 

Perhaps most critical are the provisions in the Bill relating to funding. The funding plan of the agency as recorded in Sections 14, 15, 16, 17, 1, 19 and 20 of the Bill, stipulates that funds will be drawn from a 2 per cent levy on the profit after tax of companies and enterprises, with annual turnover of N100 million and above grants-in-aid, assistance from bilateral and multilateral agencies, with sums accruing to the fund by way of gifts, endowments bequest or other voluntary contributions.  FIRS has been mandated to collect the money and failure to pay the tax on demand attracts a penalty of N1million.

This plan represents another layer of taxes and levies on private sector operatives who are already over-burdened by a myriad of taxes and levies imposed at Federal, states and local government levels.  This defeats policy objectives under NEEDS, which is to drive a private-sector led economy, ensure public sector reform and implement a new social charter. To this end, NEEDS specifically prescribes that the role of the public sector should be redefined to be a facilitator, improve firm-level efficiency and reduce the cost of doing business. NEEDS also specifically seeks to address the problem of multiple taxation at different levels of Government by implementing appropriate tax reforms. These proposed levies under the NITDA Act offend the specific provisions of the government’s medium-term economic policy (NEEDS), constitute an undue burden on private sector operators and will lead to increase in cost of services, to the detriment of consumers in an already depressed economy.

The National IT policy provides that start-up funding should be provided by government, to the tune of $150 million, as a means of kick-starting private sector investment in this area. The Bill also provides for fiscal incentives to fuel such investment. As it stands, the provisions in the Bill imposing additional taxes on the private sector is at variance with what is contained in the National IT Policy. This re-echoes the usual disconnect between policy initiatives and the legal regime. In order to give effect to the policy goals and objectives as set out in the National IT policy, the Bill must reflect the policy thrust of government which in this case, places primary responsibility on government to kick-start the development in the sector. This it could do through a start-up grant to NITDA instead of imposing additional taxes on the private sector. We must note that this is not peculiar to Nigeria. In countries like India and China, government is known to have gone as far as providing seed capital to kick-start investment and development of the IT market. The result is a rapidly growing IT industry, which is creating jobs, generating wealth and much-needed foreign exchange from exports. Nigeria can achieve the same if we get our priorities and strategies right. We cannot achieve these goals where we continue to burden the private sector with a plethora of taxes and levies instead of creating opportunities and incentives for investment and continued growth.

The only way to get the private sector involved in this drive is by appropriately mobilising them.  If government were to succeed in getting the country hooked on the Global IT map, the private sector will be a major beneficiary in an age of globalisation and privatisation.  This should be the gospel to enlist their interest.  It is known that captains of industry today complain about the quality of the graduates unleashed on them, the only way to guarantee quality education is by partnering with government on an objective as laudable as this.  Government has a duty to get all involved in this endeavour and prepare the citizenry for benefits derivable from this scheme.
The establishment of IT Parks as contained in Sections 23 and 24 of the Bill, is a commendable provision which industry watchers say should be beefed up with other provisions on fiscal incentives as contained in the policy.
 
Mr. Mbaka writes in from Lagos.