Stakeholders in telecommunications recently called for Executive Order as the only solution to the perennial issue of multiple taxation in the sector. Will government toe this line as it did on the issue of local content in ICT? Will this really be efficient enough to put an end to this problem? SAMSON AKINTARO asks
After years of appeals and interventions, stakeholders in Nigeria’s telecommunications sector are demanding a pragmatic action from the Federal Government to address the issue of multiple taxation. This, they want in form of an Executive Order (EO) compelling state governments and their various agencies to desist from imposing arbitrary taxes on telecoms facilities across the country.
Before now, there had also been repeated calls for declaration of telecoms infrastructure as Criticality National Infrastructure, to prevent shutting down and destruction of telecoms infrastructure over tax matters. However, while a bill to that effect has suffered undue delay at the National Assembly, players believe a faster approach is needed in form of EO.
An Executive Order is a directive from the President, which are gazetted and made enforceable with the force of law. It is seen as a quick and fast way of addressing national issues as opposed to legislation, which goes through long process.
Last year, President Muhammadu Buhari, signed some EOs relating to ease of doing business in the country and local content. Specifically, EO 005 addresses the concerns of stakeholders in the ICT industry regarding the problem of local content. While implementation is still on, nothing seems to have changed in terms of local content in the ICT industry one year after the order. However, analysts believe the country is making gradual progress in the area of IT procurement.
While the issue of multiple taxation is as old as the telecom sector itself, players have for years appealed to the states and local government authorities in the country to consider the importance of telecoms to the economy and desist from arbitrary taxes impositions. Several times, the telecoms regulator, Nigerian Communications Commission (NCC) have had to intervene in cases between state governments and the licensed operators over issue of taxes, which often leads to shutting down of base stations.
To have a better grasp of the situation, the regulator in 2012 established what it called Industry Working Group (IWG) on multiple taxation. The duties of the IWG varies from reviewing recent cases of multiple taxations suffered by the operators within the telecoms industry, to liaising with the federal Inland Revenue Service (FIRS) and the Joint Tax Board (JTB) to ensure a fair and equitable tax/levies for operator within the industry and where necessary, a tax review of the taxes and levies (Approved List for Collection) act of 1998.
However, years of engagements and interventions by the Group under the supervision of NCC have failed to produce desired results. Indeed, the number of taxes and arbitrary shutting down of base stations continues unabated, even until now.
EO as solution
For industry stakeholders who gathered at the maiden edition of Nigeria Telecoms Leadership Summit recently organised by NCC in Lagos, the only solution to the problem of multiple taxation in the sector would be an Executive Order by the Federal Government. A former Minister of Communication in the country, Dr Omobola Johnson, who spearheaded the call, said years of talking have not changed the multiple taxation situation in the telecoms sector, but rather, it is getting worse. Johnson, who as a Minister, had to visit all the state governments to make them realise why they need to soft pedal on their penchant for taxing telecom infrastructure arbitrarily, said she was surprised that four years after she left office, nothing has changed. “I left office in 2015 and today, we are still talking about multiple taxation, which they had been talking about 10 years before I became Minister. Before I left office, we engaged with all the state governors, we met them one by one to let them realise the importance of telecommunications to the economy and why the sector should not be killed with taxes. We got their promises, but today the situation is getting worse. It shows that negotiations have failed. The only solution right now is for the Presidency to issue an Executive Order against multiple taxation in the sector,” she said.
Increase in taxes
Corroborating the former Minister, the Chairman Association of Licensed Telecommunications Operators of Nigeria (ALTON) Engr. Gbenga Adebayo, said it has become clear that interventions by the Nigerian Communications Commission (NCC) and negotiations with the state governors are not the solution to the problem of multiple taxation facing the sector. Adebayo disclosed that as at the last count, the number of taxes to be paid by telecom operators had risen to 39. “We have been talking for years and we are still talking but the talks are not taking us anywhere. The taxes are increasing and most of it has nothing to do with telecoms but because the state governments see telecoms as cash cow, they all want to milk it. We are saying enough is enough, we need an Executive Order, not interventions or negotiations because they have not worked,” he said.
He noted that the tax situation is sending bad signals to investors who are considering coming into the country. “Investors are watching and the signal we are sending to them with the issue of multiple taxation and multiple regulation is discouraging the. We have been doing same thing same way over the years and we have been getting same result. It is time we changed approach,” he said.
A peep at EO5
In recognition of the role of science, technology and innovation in national economic development and to increase the quantum of value created in the Nigeria economy via Nigerian content in public procurement, President Muhammadu Buhari signed Executive Order No.5 (EO5) to provide a platform to harness Science, Technology and Innovation. EO5 aims to promote the “Made in Nigeria Campaign”, drive national competitiveness, productivity and economic activities across sectors. The thrust of EO5 is that Nigerian businesses shall have preference in the award of contracts in respect of Science, Engineering and Technology projects in line with the Procurement Act 2007. Consideration shall only be given to foreign companies where the requisite local expertise is lacking, provided that such foreign companies have demonstrable and verifiable plans for indigenous capacity development prior to the award of such contracts.
EO5 also mandates the National Office for Technology Acquisition and Promotion (NOTAP) to develop, maintain and regularly update a Database of Nigerians with expertise in science, engineering, technology and other fields of expertise while the Ministry of Interior shall take into consideration the NOTAP Data Base together with data from the Nigerian Academy of Engineering; Nigerian Content Development and Monitoring Board; Federal Ministry of Science and Technology and other relevant Ministries; in determining the availability of local skilled manpower in Science, Technology and Innovation (STI) when considering applications for the grant of Expatriate Quota. The Federal Inland Revenue Service (FIRS) and the Ministry of Finance shall ensure that tax incentives are granted to existing machine tools companies (including foundry, machine shop, forge shop, and indigenous artisans) to boost local production of these products. The FIRS is also encouraged to provide tax incentives to Small & Medium Enterprises and foreign firms who use local raw materials that are authenticated by the Raw Materials Research and Development Council (RMRDC).
However, the immediate past Minister of Communications, Barr. Adebayo Shittu, had expressed concerns over the situation of things in terms of local content in the ICT industry despite the existence of the EO5. According to him, to fully enforce and implement Executive Order on local content in information technology, the National Assembly needs to enact a holistic law to criminalize breach of the policy. Shittu noted that major challenges to growing Nigerian IT sector has largely been apathy over the consumption of local products and services.
“Local content must be elevated to such a level as to save our economy,” he said. “What more can be economic sabotage if actions that cause massive loss of jobs and foreign exchange are not redressed?” Noting that local content does not mean excluding foreign participation in the Nigerian economy, the Minister assured that National Information Technology Development Agency (NITDA) was committed to the implementation of the local content program and the executive order on local content. Some stakeholders in the industry also believe that current executive orders are not strong enough to address the problems they are meant to solve, noting that an outright law would still be needed.
While it is unclear if government is thinking in the direction of issuing Executive Order for the multiple taxation challenge, it is expedient for the National Assembly to pass the Critical National Infrastructure bill into law. With this, telecoms facilities will not be shut down unnecessarily and perhaps, at that time, the revenue-hungry states’ agencies would be able to go the way of peaceful resolution of tax matters.
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