ICT Africa Headline News

Govt Mulls Tax Relief for Telecoms Firms

03 August, 2014

Source: The Guardian

By Ade Ogidan
THE Federal Government has unfolded plans to reduce taxes on telecommunications infrastructure, to encourage companies to spend more on networks in the country.

The tax relief agenda was disclosed at the weekend by the Communications Technology Minister, Mrs. Omobola Johnson.

The Minister explained that "for every naira that is spent on infrastructure, about 70 per cent of it is spent on taxes. "We're therefore going to bring that down to a much more reasonable level at 30 to 40 per cent."

Beside taxes, the operators in the country also face the challenges of unreliable power supply and the threat of bomb attacks from Islamist militants, which some of them have blamed for relatively poor service standards being experienced by subscribers.

Johnson however observed that while the constitution allows only the Federal Government to tax mobile-phone companies, states and local governments have beem levying operators over infrastructure instalations, including towers and base stations.

She therefore pledged an effective harmonisation of taxes and levies, to dethrone current multiple taxation regime.

Already, the assessed unfair tax regime has spurred many of the operators to consider asset stripping to strategically recoup costs and thereby stay afloat to offer improved services.

For instance, one of the major operators recently mulled a plan sell a stake in its Nigerian mobile tower network, valued at more than $1 billion.

Indeed, the Chairman of India's largest mobile phone operator- Airtel, Sunil Mittal, said in a May interview that operators are unfairly taxed in Nigeria because the industry supports other areas of the economy.

The Minister also noted that the lingering insurgency by Boko Haram in the North East of the country has "badly affected" phone companies' operations in the region, as the militants have been targeting telecommunications network sites.

"There are parts of the North East that no operator can go into, even if they want to," Johnson said, adding that "whenever they have to desperately go and maintain, they do get the support of the security forces to escort to their base stations to do their work."

The scenario is against the fact that the country remains a prefered destination for international phone companies eager to tap into demand from the country's 170 million people.

The total number of connected mobile-phones increased to 177 million as at the end of April, compared with 170 million at the start of the year, according to the Nigerian Communication Commission.

Reflecting the rising investment profile of the telecommunications companies, MTN, for instance in April, secured a $3 billion loan to invest in the country, while Globacom, the third-biggest carrier, is spending $1.25 billion to upgrade and expand its network.

Meanwhile, the Minister has disclosed plan by the government to award seven licences within a year to companies that will build fiber optic networks in each of the country's six geopolitical zones, to enable the nation attain 30 per cent broadband penetration by 2017.

"These companies will build the infrastructure which they will then lease to the network operators. So, in this way, we are trying to attract more investment into the infrastructure building, she said."

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