The Nigerian Communications Commission (NCC) recently convened a Regional Workshop in the historic city of Ibadan, Oyo State, with industry stakeholders. The purpose of this gathering was to engage senior government officials from all South West states in Nigeria to address the pervasive issue of multiple taxation and regulations imposed on telecom companies by various state agencies and agents. The event aimed to foster a better understanding of the detrimental effects of these practices on the country’s economic development.
Mr. Adeleke Adewolu, the Executive Commissioner for Stakeholder Management at NCC, delivered a keynote speech at the workshop, shedding light on the challenges posed by multiple taxation and its adverse impact on Nigeria’s economic growth.
“Nigeria is not only Africa’s most populous nation but also boasts the continent’s largest economy. The country’s strong economic growth potential holds the promise of prosperity, not only for its citizens but also for the entire West African region. However, the persistent issue of multiple taxation, often referred to as ‘nuisance taxes’ by the World Bank, has hindered and continues to hinder economic development in Nigeria.
Mr. Adewolu emphasized that taxation, as a tool, plays a crucial role in economic development. It provides a reliable source of funding for essential public programs and investments, ensuring the equitable distribution of resources. Taxation, when appropriately utilized, promotes sustainable and inclusive growth.
He continues, however, the workshop aimed to address the paradox of taxation becoming an obstacle to economic development. Multiple taxation, as defined by the National Tax Policy 2017, refers to the imposition of the same or similar taxes on the same income base, transaction, or entity by multiple levels of government in various jurisdictions. While some level of taxation is expected in a federal system of governance, the levying of identical taxes on the same entity by multiple state or local government councils poses a significant problem.
The consequences of multiple taxation are dire, he said. Rather than increasing government revenue, it often leads to the collapse of profitable businesses, hampers innovation, encourages tax evasion, and complicates tax compliance he stated. According to the World Bank, when a specific tax base is excessively taxed, overall tax revenue eventually declines because companies either go out of business or engage in significant evasion, he cited.
Additionally, he said the administrative burden of complying with multiple taxes exacerbates the economic burden, making Nigeria less attractive for businesses and investments adding that this affects the country’s ability to compete globally and weakens its economic foundations.
In his words: Recognizing the severity of this issue, the Nigerian government, under the leadership of President Bola Ahmed Tinubu, has taken steps to curb arbitrary taxes in the country. Executive Orders have been signed to address this problem, and the Committee on Fiscal Policy and Tax Reforms has been inaugurated to harmonize taxes further. These measures aim to create a conducive environment for both local and foreign investment.
“The workshop served as a platform to rethink the approach to taxation, emphasizing its foundational principles:
Neutrality: Taxation should be neutral and equitable, treating all forms of business activities fairly.
Efficiency: Compliance costs for businesses and administration costs for governments should be minimized.
Certainty and simplicity: Tax rules should be clear and simple to understand, promoting optimal decision-making.
Effectiveness and fairness: Taxation should produce the right amount of tax at the right time, avoiding double taxation and evasion.
Flexibility: Tax systems should be dynamic and adaptable to technological and commercial developments.
“The National Tax Policy 2017 underscores the need to eliminate multiple taxation at all government levels. The workshop aimed to clarify common misconceptions about taxation and encourage a renewed commitment to creating a business-friendly environment.
Mr. Adewolu expressed optimism that the workshop’s deliberations would lead to the eradication of multiple taxes and a more business-friendly environment. He urged both the public and private sectors to view taxation as a win-win solution for steering the national economy forward.
“The workshop represents a significant step toward addressing the challenges posed by multiple taxation and its impact on Nigeria’s economic development.
According to the research, It’s important to note that the impact of taxation on the telecoms business can vary significantly from one country to another and can depend on the specific tax policies in place. Governments must strike a balance between generating revenue, promoting industry growth and innovation, and ensuring affordable access to telecommunications services for their citizens. Additionally, telecom companies must carefully manage their tax obligations to remain competitive and financially viable in a constantly evolving industry, though taxes can be used as a tool to promote certain policy goals in the telecom industry, such as encouraging broadband deployment in rural areas or funding emergency services, it added.