Column

Editor, Itedge, Segun Oruame.

How not to tax

There is a rumble in the industry over tariffs. But not at the customers end. Telcos want a slice in equipment import to 2.5% and at best 0%. Local computer assembly companies are also pushing a similar request. But would government yield? It is not likely that government would listen. But again, it is not likely that government would remain impervious to the duties grumble.

It has in the past demonstrated some level of
understanding and an almost bias pre-disposition
toward local IT entrepreneurs. But this one request
may just about be equal to asking for the king’s
crown. No king would grant that.

IT players are careful about the words they use to
make their demands. They are also showing some discretion in how they talk to the media on their
grumble. They have been prudent with words lest they
irk a government benevolent enough to open up the
sector and divest itself of unnecessary powers to
control the young but money-spinning industry.

But they are not being too quite either. They want
some actions and they want it quickly if only to help
drive volume in their services and products, and
ultimately, to allow the consumers access what is on
offer at a lower price.

There are two words the operators are resolutely
shying from using. One is ‘concession’ and the other
is a twin, ‘subsidy.’ You are unlikely to be granted
audience at Aso Rock if what tops your agenda is
‘Concession. You are also not wont to win the
attention of the World Bank (WB) and the International
Finance Corporation (IFC) if a key component of your
discourse is ‘Subsidy.’ The Bretton Wood institutions
are as averse to subsidy as is the government of the
Federal Republic of Nigeria to running business with
public hands.

Immediately it came to power in 1999, this government
made it clear that business is for private hands and
the responsibility of government is to provide
socio-political safeguards for good business to
flourish from private engines. That is one reason it
may elect to do something on the tariff rumble.

The IT players know this and so they have chosen to
insist on using the word ‘review’ to express their
grumble as often as a Pentecostal pastor would use the
words ‘hell’ and ‘prosperity’ to get the congregation
switched permanently to him.

When the WB and IFC rubbed minds with some of the
telcos in Lagos recently, their umbrella group, the
Association of Telecommunications Companies of Nigeria
(ATCON), simply asked that the Bretton Wood
institutions implore government to effect a downward
review of import duties. And they got listening ears.

ATCON had probably interacted enough with Finance
Minister Ngozi Okonjo-Iweala to know that to the WB,
subsidy is a plague to be avoided at all cost.
Concession, on the other hand, is a mousetrap that
ultimately widens to become big enough to ensnare an
elephant. But ATCON has good arguments for a downward
review, which the WB and IFC could not dismiss. It is
possible to woo over Aso Rock and get import tariff
knocked down to 0%. And then there would be peace.

You would not like this piece of news if you were a
Nigerian. Your country is ranked as having one of the
worst import regimes. It is notorious for its several
winding import procedures. For an average importer,
there is difficulty in discerning what is a real
import procedure and what is dubious; and in the
winding paths, fatal errors often result.

That is what ATCON wants an end to. And even more, it
wants an import tariff system that would be cognisance
of developments elsewhere in the world. Take the
pre-shipment inspection for instance; very few
countries have unwittingly ensnared themselves with
this because of the incorrigible tendencies to waste
the time of the importers who have to pay ports
authorities demurrage for the sins of the pre-shipment
inspectors.

Take a close look at the list of tariffs. Surcharge is
7%, ECOWAS is 0.5%, then there is 5% VAT and then
there is CIF and there is CIS for 1% and there is the
20% base tariff. Everyone has a charge to collect and
down the line the banks are not going to stop counting
their interest because SGS or whatever else posed a
stumbling block. At the end of it all, the total
tariff on the telecom equipment comes to as high as
70% the original cost value of the equipment.

It is business. It is the consumers that pay for the
winding charges and the sweat and tensions of the
operators at the wharf. It is the market that must pay
for the goods at the NAHCO waiting since last year to
be cleared.

Government has demonstrated good intentions for the
sector. It must push its commitment further still to
the wharfs to clean up the mess called import tariffs
on telecom equipment. More so because not one single
tool can be fabricated for now to serve the industry.
And even more cogently, because the world is moving
closer to meeting the terms of the WTO Information
Technology Agreement of 1997.

Under the WTO deal, subscribing nations are to phase
out import duties on communications equipment by 2005.
The EC would begin to implement this from next year
and that leaves us vulnerable selling service at
outrageous prices to ordinary consumers while the
operators get further flattened out in a market where
global competition is against them.

It is not for nothing that South Africa has a zero
tariff regime, as is Zimbabwe on telecom import. It is
also not for nothing that ATCON is arguing that the
least an environment that has failed to offer support
infrastructures could give in compensation to telcos
is zero tariffs. Power does not blink crazily in South
Africa and in Ghana, operators do not factor heavy
budget in purchasing diesel generators.

Government has a responsibility to ensure that the
provision of telecom service does not come at an
outrageous price and that the relative success in the
industry does become just a spark and nothing more.

It must do something: Kill the awful tariff or the
tariff will ultimately kill the IT industry.
Even the WB and the IFC would agree with it
(government) that a baby eagle still needs to be fed
on air or else it would crash. Or as Nigerians are
wont to put it ‘Pafuka!’
 

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