By Chinenye Anuforo [email protected]
Despite the contribution of the telecommunications sector to the growth and development of the nation’s economy, telecom operators still battle the issue of multiple taxation.
Telecommunications firms in Nigeria pay over 30 different taxes and levies, imposed by state and local governments.
With duplication of federal, state, and local government tax regimes and tax enforcement by multiple agents, telco operators often experience facility lockouts by these agencies in a bid to enforce compliance in the collection of taxes. This often results in the degradation of the network quality. For instance, when the operators are denied access to sites for refuelling, maintenance, or fault resolution, this leads to congestion and other deficiencies of service quality.
According to the Tax and Enabling Business Environment in telecoms sector, the payment of all these levies and taxes is reducing the pace at which the sector is expanding in the country and thereby inhibiting digital inclusion and mobile penetration as the cost of all these taxes are mostly passed to the consumers.
Virtually all the major Telecommunications companies in Nigeria pay the tax directly or indirectly either in form of tenement rate or site installation fee or effluent, etc.
Recently, the Federal Inland Revenue Service said MTN Nigeria Communications Plc and Airtel Networks Limited were two of its top 10 performing taxpayers in 2021. Also, MTN in April disclosed it paid about N757bn direct and indirect tax to government agencies in 2021.
In a statement signed by the Company’s Secretary, Uto Ukpanah, the firm said, “In 2021, MTN Nigeria’s total tax contribution to all government agencies including the FIRS amounted to N757.6bn while FIRS collected a total of N6.4trn tax revenue in the year.
“Specifically, MTN Nigeria paid a total of N618.7bn in direct and indirect taxes to the FIRS in the 2021 tax year, representing approximately 13.5 per cent of the total FIRS collection for the year.”
A report released last month by SB Morgen titled “Inside Nigeria’s Subnational Fiscal Crisis” stated that multiple and aggressive implementation of taxation on telecommunications companies is the cause of bad network quality.
The report stated that the poor network quality is an evident result of telecoms corporations’ numerous taxation.
It said, ”A clear impact of multiple taxations of telecommunications companies is the degradation of network quality. This mostly occurs when state authorities, in a bid to enforce compliance in payment of taxes, lock up the facilities of telecom operators and deny them access to their sites for refuelling, maintenance or fault resolution.”
The report stated that the regulator’s forceful lockout of telcos would result in catastrophic network disruptions, affecting a large number of Nigerians.
The report said, “The lockouts are quite often targeted at large sites, which effectively paralyses a good section of the network, causing complete network outage for the affected communities over an area that could stretch across as many as two or more adjoining states.”
According to the report, the effects of such network failures are not limited to the impacted telecommunications network but may spread to others as affected clients transfer to other network providers when they are unable to enjoy service from their current network providers.
A good example according to the report said, “telecommunications operators in Kogi State warned that the shutting down of their sites by the Kogi State government in a bid to force operators to pay more taxes and levies could lead to a communications blackout in as many as 11 states.”
Speaking to pressmen recently, the Chairman, Association of Licensed Telecoms Companies of Nigeria (ALTON), Mr. Gbenga Adebayo, said the issue of multiple taxation had been a recurrent decimal that needs Executive Order to address the situation.
He said, “Multiple taxes affect the operating environment and there are nuisance taxes which are taxes that are not in the statute, and it is in an attempt to collect those taxes that public actors often disrupt telecom services.
“Those types of illegal taxes and levies should be eliminated. The cost and process of collecting them today are offensive and very destructive and that should stop. That is what we are saying. So, there are two things that we are saying.
“The taxes that are not supposed to be, they should be removed. Once those taxes are removed, the actions of public actors when collecting the taxes will end. We did say the classification of telecoms as critical national economic infrastructure is very important. This issue of critical national infrastructure comes to bear again, we need this classification to be able to minimise the destruction.”
On her part, Ms. Funke Opeke, chief executive officer, MainOne, said multiple taxes have slowed down telecoms growth in the last ten years.She commended the United State government for protecting indigenous companies by giving them incentives like tax waivers, and therefore called on the Nigerian government to device means of encouraging indigenous companies, rather than stifling them through multiple taxes.
But Law Kalu, a lawyer, said that the industry must also highlight the consequences of multiple taxation which includes the relocation of businesses outside Nigeria evident in the manufacturing sector of the Nigerian economy, downsizing and retrenchment of staff, unemployment and loss of revenue to government.
Rotimi Akapo, Advocaat Law Practice explained that the telecommunications industry is a major source of tax revenue for governments and operators are frequently subjected to audits by tax authorities to confirm compliance with their tax obligations. However, taxes and levies on operators in the telecommunications sector impacts on the services provided by operators in terms of service adoption, pricing, investment decisions, quality and affordability of services. He said, there is an intrinsic link between high taxes and levies and investments in infrastructure and equipment by operators, quality of services and the affordability of the service by the subscribers.
“The tax burden of a typical telecommunications service provider includes not just the general taxes and levies imposed on all companies in the country, but also a myriad of sector-specific and other “bespoke” taxes and levies that further reduces their profitability. The concerns are not just on sector specific taxes and levies but the imposition of duplicated taxes by different tiers of government. “
A recent report by SBM Intelligence disclosed that the telecoms industry suffers from overtaxation as a result of its sustained growth in the last 20 years.
The report titled, ‘Taxing Nigeria’s subnational economies to oblivion’, said, “At the federal level, telecommunications companies are expected to pay taxes such as Companies Income Tax, the Capital Gains Tax, Withholding Taxes, Stamp Duty, National Industrial Training Fund, Employees Compensation Scheme, The Tertiary Education Trust Fund, National Housing Fund contributions, Contributory Pension Schemes, and Customs Duties.
“These taxes are applicable to all incorporated companies in Nigeria. There are also sector-specific taxes and levies such as the Annual Operating Levy paid to the Nigerian Communications Commission by all holders of licences issued by the regulator, the National Cybersecurity Fund, the National Information Technology Development Fund Levy and Right of Way charges.”
Jide Awe, an ICT guru warned that the continual perception of viewing telecom/ICT as a cash cow that can be taxed to raise revenue is unhelpful and affecting telcos negatively. It fails to see the need to have more people participating, developing and contributing to growth and their communities through the ICT/Digital economy. It is vital for productivity and progress in this age.