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25-Feb-2025

Opinion

The Crushing Weight of Multiple Taxes on Telcos: A Call forReform in Nigeria's Business Environment 2 months ago

Tony Onyima, Ph.D, refocus the heavy burden of multiple taxes that telecommunications operators bear across tiers of government in Nigeria, and the need to address the trend that is misaligned with global practices.

The telecommunications sector in Nigeria has been a beacon of innovation and economic growth, significantly contributing to digital inclusion and the overall development of the nation. However, this transformative industry is currently stifled by an overwhelming burden of multiple taxes imposed by various tiers of government. This issue not only hinders the growth potential of telecommunications operators but also reflects broader challenges within Nigeria's business environment. The urgent need to address this trend is critical, especially as Nigeria ranks 131st among 191 economies in the World Bank's ease of The Crushing Weight of Multiple Taxes on Telcos: A Call for Reform in Nigeria's Business Environment.

The telecommunications sector in Nigeria has been a cornerstone of economic growth and digital inclusion, yet it finds itself under the crushing weight of an overwhelming tax burden imposed by various levels of government. As Nigeria ranks 131st among 191 economies in the World Bank's Ease of Doing Business Index, the need for a reevaluation of the regulatory and tax landscape for telecommunications operators has never been more urgent.

The Ease of Doing Business Index serves as a critical benchmark, evaluating how conducive a country's regulatory environment is for business operations. Countries that rank in the top tier (1-20) typically offer straightforward and friendly regulations that facilitate growth and innovation. Unfortunately, Nigeria's persistent struggle to improve its ranking reflects a systemic failure to create a supportive environment for businesses, particularly in the telecommunications sector.

Since the return to democratic governance in 1999, creating a conducive regulatory environment has been a recurring theme in political campaigns. However, successive governments have made little progress in transforming this vision into reality. Despite a slight improvement in Nigeria's ranking—moving from 146 in 2018 to 131 in 2019—the overall trend has been stagnation, with an average ranking of 143.92 from 2008 to 2019. The highest point was recorded in 2008 at 120, while the lowest was an alarming 170 in 2014. This lack of meaningful progress is indicative of deeper issues plaguing the Nigerian business environment.

The primary culprit behind this stagnation is the relentless pursuit of multiple revenue sources by both national and sub-national governments. While structured revenue collection can provide a stable income for governments, the current approach has proven detrimental to businesses. The obsession with maximizing tax revenue has created a hostile environment where operators are burdened with excessive and often duplicative taxes.

A recent revelation by Mr. Emeka Oparah, a prominent figure in the telecommunications sector, highlighted the staggering reality faced by operators: a list of 39 mandatory taxes imposed across federal, state, and local levels. This extensive list includes taxes such as aviation height clearance and stamp duties, reflecting a spectrum of obligations that are not only arbitrary but also misaligned with global best practices. Such a heavy tax burden stifles innovation and hampers the ability of telecommunications operators to invest in infrastructure and services that drive economic growth.

The telecommunications industry has undeniably played a transformative role in Nigeria's economy, fostering digital inclusion and driving innovation. However, the suffocating array of taxes and levies threatens to undermine these achievements. It is imperative for policymakers to recognize that a thriving telecommunications sector is essential for the broader economy. By alleviating the tax burden on telcos, the government can create an environment that encourages investment, innovation, and ultimately, a more competitive economy.

To align with global practices, Nigeria must adopt a more streamlined and transparent tax framework that reduces the complexity and duplicity of tax obligations for telecommunications operators. This reform should involve engaging stakeholders in the industry to develop a tax policy that promotes growth while ensuring fair revenue collection for government coffers.

Thus, the current tax landscape for telecommunications operators in Nigeria is not only burdensome but also detrimental to the country's economic potential. As Nigeria strives to improve its position on the Ease of Doing Business Index, addressing the crushing weight of multiple taxes on telcos is a critical step towards creating a more conducive environment for business. It is time for the government to prioritize reform that aligns with global best practices, fostering a telecommunications sector that can continue to drive digital inclusion and economic growth for all Nigerians.

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