Telecom operators want review, harmonisation of 39 taxes, levies on sector
...as government defends tax collection
Nigeria’s telecommunication operators have said it is counterproductive to overburden the sector with about 39 taxes and levies, thereby limiting the capital required to upgrade broadband infrastructure across Nigeria, and adding to other cost pressures the industry already has.
In view of this, there is a need to review and harmonise the tax environment in the country, they urge government.
The operators sought on Friday at the Tax Conference themed ‘Fast-tracking Economic Recovery through Robust Tax Policies and Practices,’ organised by the Telecommunication and Technology Sustainability Working Group (TTSWG) and Businessday.
Taiwo Oyedele, head of tax, Pricewaterhousecoopers, noted that in view of the strategic importance of the ICT sector in driving the digital economy, there was need for reforms in Nigeria’s taxation system with the objective to encourage investors to continue to invest in the various sectors.
The sector currently contributes about N14 trillion - 10 percent of the GDP - to the Nigerian economy. The sector’s importance became even more pronounced during the Covid-19 pandemic where it emerged as the sector sustaining the operations of different industries, ensuring that there is business continuity.
“One of the things we have to do is getting the right people to pay tax,” Oyedele said.
He also noted that the focus on people at the lower end of the society, industries that were visible, while leaving others not paying their fair share of taxes had to be addressed with the use of technology.
Kaduna State government introduced technology and was able to increase its internal generated revenue (IGR) of N13 billion to over N44 billion within the period of two years.
Matthew Olusanya Gbonjubola, director, Tax Policy and Advisory Department, Federal Inland Revenue Service (FIRS), said the situation in which the country’s revenue depended on the commodities market was abnormal, whereas in other countries the basic source of revenue for the government was taxation.
Nigeria has largely neglected its tax revenues. This is why the country has been unable to review its tax legislation for many years, with a view to bringing them up to date with current realities. The pandemic, therefore, was a blessing in disguise because it opened the eyes of the authorities to source revenue in a sustainable way.
“We have to do a delicate balancing and we are still doing so today,” Gbonjubola said. However, the government is in serious search for new revenue sources to fund the 2021 budget, and it is also aware that there is a limit to which it can continue to borrow. Even the FIRS got involved in providing palliatives during the lockdown.
Olusola Teniola, president, Association of Telecommunications Operators of Nigeria (ATCON), said while it was not out of place for operators to pay taxes - because they are law-abiding - multiple taxations were one of the biggest obstacles limiting capital deployment in the industry.
Teniola said the focus should be on taxing the outcome. The companies and entities that are carrying the tax burden are in the formal sector of the economy because they are the most visible ones and they should not be overburdened with tax with
out expanding the tax base.
“There should be consideration for the harmonisation of the multiple taxes - about 39 taxes and levies, and charges, indiscriminately applied to our industry ,” ten io las aid. harm on isat ion would aid the planning for capital expenditure programmes that are very capital intensive in terms of the industry. Lack of review would continue to promote uncertainty operators have in policy decisions.
For Teniola, a proper approach would be to sit down and have a dialogue with policymakers to understand those taxes that are not applicable to the sector. For the ones the industry is already paying, there should be a review to consider how to harmonise them.
Oyedele recommended that the 39 taxes be streamlined to five. According to Oyedele, creating multiple taxes that are not tied to any specific benefit often creates loopholes for corruption, and the government ends up not getting much from them. However, when there are less taxes tied to specific benefits or incentives, the industry is happy to oblige and the government makes more money.
Gbenga Adebayo, chairman, Association of Licensed Telecommunications Operators of Nigeria (ALTON), said the misconception during the pandemic lockdown was the authorities’ fixation on the revenue made by the operators without identifying with the cost pressures the industry carried throughout the period. Operators were able to sustain their operations as well as other businesses across the country without downtime, which cost them a lot of money and personnel to achieve.