Festus Akanbi captures the dilemma of telecoms operators who are confronted with multiple taxation and the pressure to churn out quality service in an environment where subscribers’ purchasing power has already been eroded by the current economic crisis
The Nigerian telecoms sector has come under siege from a barrage of taxes, which operators said are crippling their potential for growth and hampering access to vital services.
There are complaints that apart from legitimate taxes imposed by appropriate authorities, following necessary due processes, there are other irregular, often duplicated and sometimes hastily imposed taxes and charges from some agencies pursuing short-term revenue gains.
As the burden of the proliferation of these taxes said to be over 49 in number mounts, stakeholders warn of dire consequences for connectivity and economic development in the country.
Harvest of Taxes
Reports showed the list of some of these taxes, levies and fees imposed by the federal, state and local government including aviation height clearance, environmental impact assessment tax, business premises tax, sanitation fees, ecological fees, environmental sanitation levy, signage and advert tax, companies income tax, Nigeria Police Trust Fund levy, National Agency For Science And Engineering Infrastructure levy, tertiary education tax, industrial training fund, output VAT, Non-recoverable VAT and custom duties.
Other taxes being paid by network providers in Nigeria include sewage fees, Radio and TV, tax, wayleave tax, water levy, annual operating levy, NITDA contribution, PAYE, effluent discharge levy, annual renewal of right of way levy, hawking permit, audit fees and planning permit.
The list also includes building permits, tenement rates, infrastructure maintenance, building fitness, right of way tax, bridge crossing levy, employment development levy, withholding tax, infrastructure maintenance and community access fees, among others.
In the first quarter of 2023, the National Bureau of Statistics (NBS) revealed that the information and communications sector was one of the top contributors to Company Income Tax (CIT), as telecommunication consumers, firms, and other players in the information and communications sector paid N119.87 billion as taxes in the quarter under review.
According to the Executive Commissioner, of Stakeholder Management, at the Nigerian Communications Commission (NCC), Mr. Adeleke Adewolu, who spoke at a workshop, “Taxation provides guaranteed and sustainable sources of funding for social programs and public investments; it also serves as a tool curated by the government to effectively and efficiently distribute our commonwealth. It is thus evident that taxation is critical for making growth sustainable and equitable
However, despite the possibility of accelerating economic growth through taxation, multiple taxation, or, nuisance taxes,“ as the World Bank has dubbed it, has been and continues to be a hindrance to Nigeria‘s economic development.
Adewolu stresses this point when he said, “Supporting the tax initiatives by the various tiers of government includes indicating where a category of taxes has become cancerous to economic development. These types of taxes typically manifest themselves in the form of multiple taxation and by design, they reverse growth, stifle innovation, and discourage investment. In parabolic terms, they are the scarecrows mounted by the government to disincentivise development.“
While a level of multiplicity is expected in a federal system of governance, the levying of a particular tax on the same person/entity, in respect of the same liability by more than one state or local government council should be avoided, the executive commissioner advised.
Some operators for instance question the imposition of different taxes for the same purposes such as sanitation fees, sanitation levy and effluent discharge levy. Other duplicated taxes include the annual renewal of right of way levy, bridge crossing levy and community access fees, among others.
Stakeholders said the incidence of multiple taxation in the telecommunications industry affects the costs of call, data, and short message service (SMS), as telcos pass on the taxes to consumers through their services.
According to the President of the Association of Telecommunication Operators of Nigeria (ALTON), Tony Izuagbe, the Nigerian telecom industry is often faced with multiple regulations that usually lead to multiple taxation.
Izuagbe, who recently lobbied the Senate Committee on Telecommunications to quickly address the issues of multiple taxation to avoid revenue losses in the industry, said: “As of today, our members pay taxes to federal government agencies, state government agencies, and local government agencies.
“All these taxes impact our members negatively because money earmarked for network expansion must be redirected to pay illegal taxes.”
His position was corroborated by Adewolu, who identified multiple taxations as major obstacles militating against the sustainable development of the telecom industry in the country.
Adewolu, said multiple taxes and regulations are hindering the development of telecom infrastructure, the very foundation upon which the entire digital economy relies.
“This is not referring to legitimate taxes imposed by appropriate authorities following necessary due processes, but the many irregular, often duplicated, and sometimes hastily imposed taxes and charges by some agencies pursuing short-term revenue gains,” he said.
According to Adewolu, some agencies neglect the greater long-term impacts of their actions on investor confidence, the socio-economic well-being of the people, and overall national economic growth.
“Multiple taxation and regulations imposed on infrastructure maintenance, environmental impact charges, and waste collection charges, in addition to value-added tax and sales tax being paid simultaneously, add to the cost of services enjoyed by consumers,” he said.
Adewolu remarked that certain state and local government agencies were enforcing taxes and regulations without proper legal authorisation. This unwarranted imposition adversely impacted the telecommunications industry, leading to a ripple effect on its overall output.
According to him, the absence of appropriate legal backing for these taxes and regulations raised concerns about their legitimacy and highlighted the need for a more structured and legally sound approach to governing such matters at the regional and local levels.
Expressing the need for immediate action, the commissioner emphasised the importance of finding lasting solutions to this issue, recognising it as a significant obstacle to the smooth operation of the telecommunications industry.
He said that these proactive measures would not only alleviate the burden of multiple taxation and regulations but also pave the way for a more stable and conducive environment for the telecom sector.
Presidential Tax Reform Committee
“I am, therefore, pleased to note that one of the most pivotal actions taken by President Bola Tinubu, upon assuming office, was the establishment of the Presidential Tax Reform Committee.
“We have presented our recommendations to the committee, and we are confident that it will make necessary recommendations to conclusively address the various dimensions of the problem of multiple taxations and regulations.
“In our view, prioritising comprehensive tax reform will unlock the full potential of the Nigerian economy.
“These reforms should aim to simplify the tax system, eliminate redundancies, and promote transparency.
“Government at all levels must collaborate to create a harmonised tax structure that fosters economic growth rather than stifling it,” he said.
Multiplicity of Taxes
Industry analysts said the multiplicity of taxes in Nigeria can significantly impact telecoms operators in many ways. These include financial burden which has been blamed for the shoddy performance of some of their networks.
Telecoms operators have to pay multiple taxes imposed by different levels of government, including federal, state and local authorities. This can lead to a heavy financial burden, reducing their profitability and capacity for investment in infrastructure and services.
It can also bring about operational challenges as managing and complying with various tax regulations from different jurisdictions can be complex and time-consuming for telecom operators. It may require hiring additional staff or engaging external consultants to navigate the regulatory landscape effectively.
The ultimate impact is the increased costs for consumers. To offset the financial impact of multiple taxes, telecoms operators may put pressure on subscribers, who are already at loggerheads with service providers for poor service quality.
As it is, the ongoing efforts to turn the economy around need to be complemented with concrete measures to ease the operation of the existing players in the economy. This therefore makes it imperative to streamline the existing taxes, levies and duties in a way that will resolve the issue of duplication. Until this is done, telecoms operators will have no choice but to pass the additional burden to the consumers with the attendant threats to the economy.
