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By Olusegun Oruame, IT Edge News
The Nigerian telecom industry is grappling with multiple regulations and a complex taxation system that undermines operators’ ability to provide quality service. According to the Association of Licensed Telecoms Operators of Nigeria (ALTON) and the Association of Telecommunications Companies of Nigeria (ATCON), there are over 45 different taxes and levies imposed at federal, state, and local levels.
RELATED: EXECUTIVE NOTE – Multiple taxation: An impediment to economic development
“Today, our members pay taxes to federal government agencies, state government agencies, and local government agencies. This proliferation of taxes negatively impacts investor confidence and the sector’s ability to provide optimal connectivity,” stated Gbenga Adebayo, ALTON’s chairman to IT Edge News.
Anthony Emoekpere, president of ATCON, echoed these concerns: “The Nigerian telecoms sector is under a tax siege, often perceived wrongly as a cash cow to be exploited at all costs.” Both associations represent a wide range of operators and stakeholders within the industry.
The industry faces irregular, duplicated, and hastily imposed taxes and charges from various government levels, aiming to boost revenue. This issue of multiple taxation is a significant barrier to economic development, according to Adeleke Adewolu, the former Executive Commissioner for Stakeholder Management at the Nigerian Communications Commission (NCC). The National Tax Policy 2017 defines multiple taxation as the imposition of the same or similar taxes on the same income base, transaction, or person by one or more government levels, in one or more jurisdictions.
While some level of multiplicity is expected in a federal system, taxing the same entity for the same liability by multiple states or local governments should be avoided. Multiple taxation paradoxically does not lead to increased government revenue; instead, it cripples otherwise profitable businesses, impacts the ease of doing business, shrinks the tax base, incentivizes tax evasion, and complicates tax compliance.
The World Bank notes that taxing a specific base will increase revenue only up to a certain point, beyond which overall tax revenue will decline as companies go out of business or evasion increases significantly. The economic burden of multiple taxation is further exacerbated by the administrative burden of complying with these taxes, making Nigeria an unattractive environment for healthy business and competitive practices.
This taxation issue hampers Nigerian businesses’ ability to compete internationally, weakens economic foundations, devalues the Naira, and contracts the gross domestic product.
Taxing rightly
To address these issues, the following principles should guide taxation:
- Neutrality: Taxation should be neutral and equitable between different business activities, ensuring optimal allocation of resources.
- Efficiency: Compliance costs for businesses and administration costs for governments should be minimized.
- Certainty and Simplicity: Tax rules should be clear and simple, enabling taxpayers to understand their obligations and entitlements.
- Effectiveness and Fairness: Taxation should produce the correct amount of tax at the right time, avoiding double taxation and unintentional non-taxation while minimizing evasion and avoidance.
- Flexibility: Tax systems should be dynamic and adaptable to technological and commercial developments, meeting current revenue needs while adjusting to changing circumstances.
According Adeleke other stakeholders, these principles can help create a more conducive environment for business growth, ensuring the Nigerian telecom sector can thrive and contribute significantly to the economy.
