Nigerian government may review duty on telecom import

The raging debate over tax-exempt for telecom equipment import is not about to end even as a flicker of hope rises for operators, report IT Edge news crew.

Government is considering knocking out duties on import tariff on telecom equipment.

But that would depend on the outcome of a small team set up by the Finance Ministry on the issue. The group’s brief include to consider the merits or otherwise of granting a duty-exempt on all telecom import. Should the finance team favour duty-exempt, apologists of zero tariff would have won a long industry battle.

But for now, the debate rages on. Telecom operators are canvassing for zero tariff on import and have made a strong case for it under the aegis of their umbrella body: the Association of Telecom Companies of Nigeria (ATCON).

There are listening ears to ATCON’s pleas within government, though many are still not persuaded by its arguments. Some lawmakers are of the opinion that no waiver should be granted. Their argument is that the sector has proven to be a goldmine for operators and asking for waiver was tantamount to demanding that government tax no rich company.

Chairman, Senate Committee on Communications, Senator Baba Tella, would rather recommend that operators ask for “tax deference” as government was unlikely to have a rethink on the removal of the waiver. The government had in 2001 waived duties on telecom import. The waiver elapsed last December but operators want waiver to stay.

“The waiver was informed by government’s desire to meet a particular target, to aid operators to achieve speedy rollout. If government thinks it has achieved that target, then it may have no need to continue with the waiver,” said Baba Tella.

One lawmaker in Abuja told IT Edge that operators were not being sincere arguing that “if poor farmers pay tax why should these people be saying that tax would hurt them?”  To him, operators should consider government position from the point of view what it, government, could do with the revenue from such exercises for “the general good of Nigerians. How many people are using the phone anyway?”

Another lawmaker and a member of the House of Representative Committee on Communications was more blurt. He said every profit-making organisation that is making profit owe it a duty to pay tax. His words: “That is a most irresponsible thing to ask. No operator can claim that it is not making money. They are all hiding under the excuse that they are developing the economy as if they are offering charity services. Business, I mean profitable businesses must be taxed.” 

Abuja is yet to make an official statement on the matter, though both the Ministry of Finance headed by Ngozi Okonjo-Iweala and the Presidency are of the belief that waiver would equal subsidising an industry that is private-driven.

“No government would feel comfortable to subsidise competition. Government first duty is to encourage competition. The government has done that. I think we should be grateful for that. If there is a need for what the GSM operators are asking, government would be the first to grant it,” a senior official of the Finance Ministry told.

The World Bank groomed Okonjo-Iweala is unlikely to shift grounds though close associates say she is easily persuaded by superior arguments. “If ATCON has strong points, the ministry is unlikely to remain adamant as her business in the first place is to improve the country’s financial health,” one source in the ministry said.

ATCON, which plans to meet Okonjo-Iweala soon, is building its case on several planks. Its strongest points are that consumers ultimately pay for all such tariffs and operators are likely to have fund to rollout faster if the heavy duties are removed. Besides, ATCON is insisting that international convention favours zero tariff on telecom import and that Nigeria is under obligation to comply with such convention for its own good.

The European Community would from December of 2005 begin to charge no duties on telecom equipment originating from member countries.  ATCON says should Nigeria refuse to shift its position, telecom services, particularly those that are transnational, would be unnecessarily expensive in-country and jeopardise local operators ability to compete in the global telecom industry.

That is not all, argued one ATCON executive. “When you unduly tax licensed services, you create room for operators in the gray market to flourish.” By this he meant the hundreds of providers of Voice over Internet Protocol (VoIP) services that abound in major cities of the country. VoIP calls could be as low as N18 per minute while the cheapest on any licensed network is no less than N45.

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