Telecom Companies under the umbrella of the Association of Telecommunications Company of Nigeria (ATCON) and the Association of Licensed Telecom Operators of Nigeria (ALTON) have kicked against the introduction of Value Added Tax (VAT) on their transactions with tower companies.
The growth of the Nigerian telecom industry cannot be separated from a vibrant telecom tower infrastructure which has played a pivotal role in bridging the digital divide and facilitating pervasive mobile connectivity. The tower industry in Nigeria has laid a strong foundation of growth for the telecom sector and has supported the sector in keeping pace with the fast-paced technology advancements.
Investigations by Nigerian NewsDirect revealed that despite stakeholders Forum organized by the Nigerian Communications Commission and the umbrella association of the telecom industry to tackle the issues of multiple taxation which is hindering the growth of the industry and affecting operational costs, the Federal Government introduced this new tax burden on the telecom companies in the month of September.
Under the new legislation, telecommunications companies are now required to pay a specified amount of VAT on their transactions with tower companies, effective from September 1 and Airtel Nigeria, being one of the largest players in the Nigerian telecom sector, has promptly adhered to the law and made a substantial payment of $1.5 million to comply with the tax regulation.
While the new legislation has implications for all major telecommunications companies operating in Nigeria. They will need to assess the financial impact of the VAT on their transactions with tower companies and adjust their budgets accordingly, the telecommunication companies expressed that they are not entirely at par with the new VAT seeing that they are already tasked with multiple taxation before now even though compliance with the regulation is crucial to avoid potential legal and financial consequences.
Nigerian NewsDirect research team discovered that many mobile network operators in a bid to minimise costs to address their growing consumer network frequently outsource their telecommunications infrastructure business to Tower owners.
MTN Nigeria, one of the leading operators, has an existing agreement with IHS.
In 2011, MNOs started entering into bilateral agreements to co-locate on each other’s sites. For MNOs, co-location offers a much more cost-effective and faster alternative to building new towers. Independent tower infrastructure operators have met the increasingly large demands of MNOs as they have aggressively pursued new subscribers.
President of ATCON, Mr. Tony Izuagbe speaking with Nigerian NewsDirect said that this new regulation leaves the telecom companies with no option but to increase their tariff plans since they can’t fight the regulation.
“Any additional tax burden on telecom companies, limits the amount of funds available for the companies to invest and it threatens the viability of those companies, don’t forget there has been a clamour for the telecom companies to increase tariffs,” he said.
Meanwhile, the Executive Secretary of ALTON, Gbolahan Awonuga, acknowledged that the VAT increase affects both consumers and the operators but moving forward, consumers are the ones to pay for the increased VAT as it will be added to their daily airtime and data subscription taxes.
According to Awonuga, “telecoms is the highest VAT paying agency. Telecoms are only a collecting agent for the government, i.e; they are merely players for the government to collect more tax from citizens.”
He said, “Indirectly, it is the consumers that are still paying for the increased VAT. It is a consumption tax that the subscribers must have to pay.”
Meanwhile, the Special Adviser on Media to the Minister of Communications, Innovation and Digital Economy, Mr. Osibo confirmed that the Ministry is aware of the new regulation and it is working around the best ways to mitigate the effect.
As the telecommunications industry continues to evolve, it is essential for companies to stay informed and compliant with tax laws and regulations, ensuring their continued contribution to the growth and development of the Nigerian economy.
