Data collection instruments

Multiple and illegal taxation also constitute major challenges to the deployment of telecommunications network infrastructure in Nigeria.⁴²⁶ A 2012 report of the International Chamber of Commerce (ICC) estimates that “the cumulative impact of the multiple taxes imposed on Nigerian mobile operators is close to a 35% rate, which is double the global average”.⁴²⁷ Within the context, „multiple taxation‟ refers to a situation whereby a telecommunications asset or operation is taxed multiple times by state actors at different tiers of government.⁴²⁸ According to the NCC Industry Working Group on Multiple Taxation, „multiple taxation‟ includes “the incidence of more than one tax, levy, charge, fee or other payments imposed on the same infrastructure, operations, or events by the same or different MDA‟s and other stakeholders; and the multiplication of

425 K Lee and J Prime, „US Telecommunications Law and Regulation‟, in I Walden (ed) Telecommunications Law and Regulation (Oxford: Oxford University Press, 2012), p.238.

426 Industry Working Group, Position Paper on Hazards and Further Implications of Multiple Taxation and Regulation of the Communications Industry in Nigeria (March, 2012), pp.3-11.

427 International Chamber of Commerce (ICC) Updated ICC Discussion Paper on the Adverse Effects of Discriminatory Taxes on Telecommunications Services, Document No. 373/518 (Paris, France: ICC, December 2012), p.5.

428The National Tax Policy, 2008, p.78 at paragraph 60. See also, A Sanni, „Multiplicity of Taxes in Nigeria: Issues, Problems and Solutions‟, (September, 2012) 3 (17) International Journal of Business and Social Science, 229.

nuisance taxes, levies, charges and fees”.⁴²⁹ On the other hand, „illegal taxes‟ refer to taxes that are imposed by state actors without a legal basis.

Under the Nigerian Constitution, matters relating to taxation are established both in the Exclusive and Concurrent Legislative Lists, thus enabling all the three tiers of government to exercise some level of tax jurisdiction. The Exclusive List establishes the exclusive powers of the Federal Government to legislate on the “taxation of incomes, profits and capital gains”, to the extent prescribed by the Constitution.⁴³⁰ The Exclusive List also establishes the exclusive powers of the Federal Government to legislate on customs and excise duties.⁴³¹ In the exercise of the above powers, the Federal Government has imposed taxes and levies on telecommunications operators such as the company income tax⁴³² and annual operating levy.⁴³³ On the other hand, the Concurrent Legislative List establishes the powers of the three tiers of government (Federal, State and Local Government) to collect taxes.⁴³⁴ The Fourth Schedule to the Constitution also establishes the functions of a Local Government Council to include the collection of rates.⁴³⁵

In order to clearly outline the tax jurisdiction of three tiers of government, the Federal Government enacted the Taxes and Levies (Approved Rates for Collection) Act⁴³⁶ which establishes the list of levies and taxies that can be collected by all the tiers

429 Report on the Activities and Achievement of the Industry Working Group on Multiple Taxation (2012).

430 Item 59, Exclusive Legislative List, Constitution of the Federal Republic of Nigeria 1999.

431 Item 16, Exclusive Legislative List, Constitution of the Federal Republic of Nigeria (1999).

432 Companies Income Tax Act, Cap 21 LFN, 2004, s. 9.

433 NCC Annual Operating Levy Regulations 2014.

434 Items 7 to 10, Concurrent Legislative List, Second Schedule to the Constitution of the Federal Republic of Nigeria, 1999.

435 Item 1(b), Fourth Schedule to the Constitution of the Federal Republic of Nigeria, 1999.

436 Taxes and Levies (Approved Rates for Collection) Act No.21, Cap T2 LFN 2004.

of government. In this respect, the Act establishes a list of 38 taxes that may be collected by the three tiers of government⁴³⁷ and any tax or levy that is not covered within the scope of the Act is deemed illegal.⁴³⁸ With respect to telecommunications matters, the Federal Government is entitled to collect the companies income tax, the value added tax and the education tax,⁴³⁹ while State Governments are entitled to collect fees for the registration of business premises in urban and rural areas and the fees for the right of occupancy on lands owned by the State Government in urban areas of the State.⁴⁴⁰ On the other hand, Local Governments are entitled to collect tenement rates fees for Rights of Occupancy on lands in rural areas (excluding those that are collectable by the Federal and State governments) and signboard and advertisement permit fees.⁴⁴¹

However, despite the provisions of the Taxes and Levies (Approved Rates for Collection) Act, the exercise of tax jurisdiction by the three tiers of government has given rise to the imposition of multiple and illegal taxes/levies on telecommunications operators in Nigeria. Such taxes and levies are imposed by government authorities at all tiers of government through various guises such as development levy, environment impact assessment certification fees, development fees, site approval fees, mast renewal fees, mast premises registration fees, base station registration fee, annual charges, cell site revenue, building permits, ecological permits or infrastructural development levy. The imposition and collection of the above forms of taxes and charges generally vary across

437 Schedule to the Taxes and Levies (Approved List for Collection) Act 1998.

438 Eti-Osa Local Government v Jegede [2007] 10 NWLR Pt 537 at 545.

439 Item 1, 4 and 5, Part 1, Schedule to the Taxes and Levies (Approved List for Collection) Act 1998.

440 Items 7 and 10, Part II, Schedule to the Taxes and Levies (Approved List for Collection) Act 1998.

441 Items 2, 7, and 20, Part III, Schedule to the Taxes and Levies (Approved List for Collection) Act 1998.

the 36 States and 774 Local Government areas that make up Nigeria.⁴⁴² The report of an Executive Commissioner of the NCC has noted several instances of such multiple taxes and charges. For example, in Abia State, the Infrastructural Development Fund Board demanded nineteen million Naira (N19, 000,000.00) from an operator as infrastructural development levy. In Cross River State, the State‟s Internal Revenue Service is noted to have demanded the sum of five hundred and ten million Naira (N510, 000,000.00) as the amount of cell site revenue due to the State (between 2005 and 2010). In Bauchi State, the Signage and Advertising Management Agency is noted have demanded seven hundred and fifty five million Naira (N755, 000,000.00) from an operator as signage, branding and advert levy. In Delta State, the Ministry of Environment, is noted to demanded an operator to pay the sum of two hundred and seventy six million Naira (N276,000,000.00) as ecological tariff.⁴⁴³

Apparently, the widespread incidence of exorbitant multiple charges and taxes on telecommunications operations indicates that the telecommunications industry is now being seen as a fertile ground for government revenue generation. However, the outcome is the existence of expensive governmental approval fees and charges that are confusing and difficult for telecommunications operators to administer across the different States and Local Governments in Nigeria. Also in many States and Local Governments, the

442 The varying nature of taxes in Nigeria has already been captured thus: “The Nigerian Federation comprises three tiers of government – the Federal Government, 36 State Governments and the Federal Capital Territory and 774 Local Governments. The exact number of taxes levied on businesses seems to vary significantly between various States and Local governments throughout Nigeria and “businesses may be subject to as many as 100 different taxes, charges, fees and levies, and in some instances taxed for the same event or asset” that are levied by the three tiers of government”. See M Pitigala and M Hope, „Impact of Multiple Taxation on Competitiveness in Nigeria‟, (March, 2011) 16 Africa Trade Policy, 1-2.

443 O Itanyi (Executive Commissioner NCC) „Press Briefing on Recent Cases of Multiple Taxations and its Dangers to the Growing Telecoms Industry‟ (15 March, 2012) available at

<http://www.ncc.gov.ng/index.php?option=com_docman&task=doc_download&gid=249&Itemid=>.

collection of such multiple taxes is governed by informal rules which allow a high degree of corruption and tax diversion.⁴⁴⁴ For example, tax consultants at all tiers of government are noted to be paid a certain percentage of the revenue they are able to generate.⁴⁴⁵ An undesirable outcome however is that the consultants dream up taxes and levies without a legal basis and then employ thugs and unscrupulous state security personnel as well as other unsanctioned methods to collect such illegal taxes. Such methods include the arbitrary closure of telecommunications sites and offices, physical attacks and intimidation of an operator‟s personnel and the seizure of equipment.⁴⁴⁶ In some cases, Government agencies have disrupted the operation of telecommunications operators and also caused poor quality of services due to the arbitral shut down of base stations in the process of extracting multiple taxes and levies from operators.⁴⁴⁷ According to the report of the NCC Industry Working Group on Multiple Taxation,

[Government Ministries, Departments and Agencies (MDAs)] employ coercive means such as facility lock-outs to enforce compliance by telecommunications operators. Operators are denied access to such sites

444 E Okpanachi, „Federation and Economic Growth: the Importance of Context in Nigerian Public Finance Reform‟, (2010) 41 (2) Publius: The Journal of Federalism, 319.

445 Report of the Study Group on the Nigeria Tax System - Nigeria Tax Reform in 2003 and Beyond (July, 2003) p.320. See also, A Sanni, „Multiplicity of Taxes in Nigeria: Issues, Problems and Solutions‟, (September, 2012) 3 (17) International Journal of Business and Social Science, 232-236.

446 Industry Working Group, Position Paper on Hazards and Further Implications of Multiple Taxation and Regulation of the Communications Industry in Nigeria (March, 2012) pp.4-5. See also, NCC, 2015 Year End Subscriber/Network Data Report for Telecommunications Operating Companies in Nigeria (Abuja:

NCC, 2013) pp.20-21.

447 For example, in 2010, two MTN base stations in Abuja were shut down by the Abuja Metropolitan Municipal Council for non-payment of annual charges. In May 2010, the Osun State Capital Territory Development Authority shut down MTN sites in Osogbo over non-payment of land use clearance fees. In July 2010 the Abia State Task Force shut down five of Airtel‟s base stations over the non-payment of tower premises registration and renewal fees. See E Okonji, „Ending Multiple Taxes in Telecoms‟, ThisDay, 18 September, 2014. In Ebonyi State, MTN‟s backbone and hub site was sealed in May 2010 by the Ebonyi State Environmental Protection Agency for what the Agency called non-payment of environmental impact assessment, monitoring sanitation, effluent discharge and environmental support fees for seven years. See also, P Osugwu, „Fresh Trouble in Telecoms Sector-Senate Frowns at Non-Resolution of Indiscriminate Teleclosure‟, Vanguard, 27 August, 2012.

for refueling, maintenance or fault resolution, leading to congestion and other quality of service deficiencies. Indeed, to ensure that operators feel the squeeze … the agents of the MDAs „go for the jugular‟ by targeting Hub sites to which anywhere between 20 to 100 or more sites are parented. This 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 2 or more adjoining States with quality of service deficiencies across a much wider area.⁴⁴⁸

However, a major problem with the multiple taxation of the Nigerian telecommunications industry is that it places heavy burdens on operators in an environment where the State appears to have failed in effectively fulfilling its basic responsibilities such as providing reliable and affordable access to electricity and addressing concerns for security of telecommunications infrastructure. For example, operators currently generate most of the electricity that is used to power their base stations and also provide security at such stations. Also, in an environment where multiple taxes and levies add to the operational costs of providing telecommunications services, their arbitral implementation further heightens the uncertainty of the business environment, and discourages operators from deploying new infrastructure to meet increasing consumer demand. Thus, the link between multiple taxes and the inability of telecommunications operators to rapidly deploy more infrastructure to meet consumer demands in Nigeria has already been noted by a report of the International Chamber of Commerce. According to the report,

448Industry Working Group, Position Paper on Hazards and Further Implications of Multiple Taxation and Regulation of the Communications Industry in Nigeria (March, 2012) p.6.

“the Nigerian wireless sector has highlighted that the multiple taxation system focused on the industry has negatively impacted the ability to invest in Infrastructure such towers/base stations. The industry has built only 20,000 of the estimated 70,000 towers needed across the country”.⁴⁴⁹

Another implication of multiple and illegal taxation in the industry is that operators would definitely have to raise consumer prices in order address the cost of compliance.⁴⁵⁰ This could also have the effect of reducing consumer demand for telecommunications services and generally increasing the costs of businesses that are dependent on telecommunications.

To some extent, the imposition of multiple taxes on telecommunications operators appears to reflect the outdated view that telecommunications services should be taxed as luxuries affordable only by the rich, rather than as essential services that should be made available and affordable for all. However, the imposition of such high tax burdens produces the most stifling impact on low income consumers who represent the largest population of consumers, while also hindering the universal adoption of fixed or mobile broadband and the timely achievement of the Millennium Development Goals. Hence, the current state of multiple and illegal taxation in the telecommunications industry

449International Chamber of Commerce, (ICC) Updated ICC Discussion Paper on the Adverse Effects of Discriminatory Taxes on Telecommunications Services, Document No. 373/518 (Paris, France: ICC, December 2012), p.5.

450 For example, in 2014 the Association of Licensed Telecoms Operators of Nigeria (ALTON) issued a warning to the effect that operators would have to increase the costs of services in States where multiple taxation was prevalent. According to the Chairman of ALTON, “in States where telecommunications operations become increasingly difficult due to issues of multiple taxes and levies and continuous closure of sites, we will have no option than to consider introduction of new tariff regimes to reflect the high cost of that operating environment”. See E Okonji, „Ending Multiple Taxes in Telecoms‟, ThisDay, 18 September, 2014.

constitutes an impediment to the achievement of universal service objectives and further limits the participation of Nigeria in the global information society.