Nigerian Tax System has undergone significant changes in recent times. The Tax Laws are being reviewed with the aim of repelling obsolete provisions and simplifying the main ones. Under current Nigerian law, taxation is enforced by the 3 tiers of Government, i.e. Federal, State, and Local Government with each having its sphere clearly spelt out in the Taxes and Levies (approved list for Collection) 2015.
This paper discusses the pros and cons of the legal and regulatory framework for telecommunications tax in Nigeria. Some of the issues faced in the sector includes; lack of statistical data, poor tax administration, and inability to prioritize tax effort, multiplicity of taxes and increase in underground economy. It also proffer challenges so as to engender an efficient and effective tax regime in Nigeria.
Nigeria practices a Federal system of government and by implication its tax policy can simply be referred to as that of a fiscal federalism. The tax jurisdiction of the various tier of government is spelt out in the constitution but sometimes with some overlap. Matters of difference are referred to the Joint Tax Board or the Board of Appeal commissioners.
Nigeria operates a three-tier government with certain fiscal responsibilities delineated to each level. The 1999 constitution has classified governmental responsibilities and powers into exclusive, concurrent and residual categories and specifies the right of each tier of government to exercise authority over the items in the lists.
The National Assembly is empowered to issue legislation on the taxation of incomes, profits and capital gains. It is also imperative that the National Assembly has the right to issue legislation on tax of any of the 67 subject matters on the Exclusive Legislation List in addition to the customs duties, excise duties, export duties and stamp duties specifically mentioned in the List.
The whole process makes for the administrative convenience, quick decisions and implementation, independence and people friendly since they can easily get to the grass root. However, this is not without some setbacks as it brings about uneven economic development of the country. The inequitable allocation of taxes make some States and local government very backward in the scheme of things since their only hope is on the insufficient periodic allocation from either the Federal or State government as the case may be.

Thus, the telecommunications operators are confronted with multiple levies (e.g. annual operating levy, information technology levy, spectrum fees, national number plan fees and various other fees imposed by state and local governments) on the same stream of income. Different tiers of government have enacted regulations imposing additional taxes/levies on these operators. While some of them are illegal, others are oftentimes based on opinion that telecom operators are cash cows and should willingly submit to any form of levies or charges imposed on them. This trend needs to be evaluated, considering the intent of NTP to eliminate multiple taxation at all levels and this can be curbed through proper regulation of telecommunication laws in the sector and other laws concerned in the telecommunications sector.


Table of content
Table of Statutes
Table of Cases

1.1       Background to the study
1.2       Statement of problem
1.3       Literature review
1.4       Aim and Objectives
1.5       Research Questions
1.6       Methodology
1.7       Scope of the study
1.8       Definition of terms

2.1       Introduction
2.2       Structure of the Nigerian telecommunications sector
2.3       The impact of taxing policies on the telecommunication sector
2.4       Telecommunication in Nigeria
2.5       The distribution of network-providers under telecommunication sector
2.6       The type of legislation used by taxing authorities in the sector
2.7       The major government parastatals that are authorized by taxing authorities in the sector
2.8       The regulation of taxing policies in the telecommunication sector
2.9       Conclusion

3.1       Introduction
3.2       The problems and prospects faced in the telecommunication sector
3.3       The deregulation of taxing policies in the telecommunication sector
3.4       The problems of multiplicity of taxes in the telecommunication sector
3.5       The attitude of taxing authorities towards the telecommunication sector
3.6       Conclusion

4.1       Introduction
4.2       Reforms to the relevant and appropriate taxing levies in the telecommunication sector
4.3       The effect of the proposed tax bill: Benefits to the sector
4.4       The reforms of taxing policies towards multiple taxation in the telecommunication sector
4.5       Conclusion

5.1       Findings
5.2       Conclusion
5.3       Recommendation


1.1              Background to study
The Nigerian telecommunications sector is one of the prime segments of the information and communication technology sector. Nigeria has one of the leading telecom markets in Africa. The Nigerian Telecommunication sector has evolved over the years to an oligopolistic market structure[1].
 The sector includes a strong multinational presence. The leading players are MTN, a South African based multinational company,[2] Airtel (an Indian based multinational telecommunication), Glo (a Nigerian multinational company) and 9mobile (formerly called Etisalat).
The sector over the years has contributed immensely to Nigeria’s economy and the lives of Nigerians. The advancement of mobile phone usage from basic telephone to a new enhanced service and the introduction of new technology within diverse sectors of the country have seen the sector grow massively. The sector has experienced rapid growth and has introduced easier banking services (bank mobile apps) and access to e-learning platforms to Nigerians.
1.2              Statement of problem
The Nigerian tax system is faced with many challenges[3] such as multiplicity of taxes, evasion of taxes, and abuse of taxing power and so on. The major challenges are focused on trade and petroleum taxes; however neglecting the direct as well as indirect taxes that are broad based such as tax from Value Added Tax (VAT).[4] Tax administration is challenging due to high level of illiteracy, low awareness of tax and insufficient orientation.[5] Apart from the contribution and impact of the operators in this sector, the telecoms sector is a sector that must continuously be supported in all ramifications including its fiscal. Apart from the irregular challenges of the different businesses within this sector, some major areas in the sector are faced with fiscal challenges and they are expected to be duly corrected with the aid and passive involvement of the Federal Inland Revenue Service (FIRS)[6]; deductibility of expenses, input VAT and multiple taxation.
Other challenges inherent in the Nigerian tax system include; absence of tax statistics; failure to prioritize tax efforts; poor tax administration; regulatory challenges; structural problems in the economy; underground economy and complexity of the tax laws. These are further explained below;
 It is common that the basis of deductibility of expenses for a company operating in the telecommunications sector is the Wholly, Reasonably, Exclusively and Necessarily (WREN) expenses that are incurred in generating profits of the business are deductible under the Companies Income Tax Act (as amended). There are occasions where business expenses such as non-receipted discretionary payments[7] are incurred by these operators.
These expenses are sometimes huge and arise as a result of the peculiar nature of the industry. FIRS had often times taken fixed positions during tax audits/investigation exercises in relation to tax deductibility of these expenses. A more positive disposition by tax authorities to the sector's apparent business realities will be appreciated.
Presently, under the VAT Act (as amended), the scope for the input/output offset machinery is limited to input VAT incurred on goods purchased or imported directly for resale and goods which form the stock-in-trade used for the direct production of any new product. The certainty is that these conditions for allowable input VAT may be too restrictive.
There are arrangements within the telecommunication sector exerting pressure on this provision of the VAT Act for amendment. For instance, Telecommunication Service Providers (TSP) deploy network infrastructure through subcontractors who provide and maintain infrastructure on their behalf. TSPs are not permitted to recover VAT charged by the subcontractors from their output VAT despite significant VAT costs incurred on materials.
One of the clear objectives of the National Tax Policy (NTP) is the elimination of multiple taxation in all forms which manifests within the Nigerian economy. Whilst the challenge of multiple taxation is not limited to the telecommunications sector, the degree of exposure is high.
Thus regrettably, telecommunications operators are still confronted with multiple levies (e.g. annual operating levy, information technology levy, spectrum fees, national number plan fees and various other fees imposed by state and local governments) on the same stream of income. Different tiers of government have enacted regulations imposing additional taxes/levies on these operators. While some of them are illegal, others are oftentimes based on opinion that telecom operators are cash cows and should willingly submit to any form of levies or charges imposed on them. This trend needs to be evaluated, considering the intent of NTP to eliminate multiple taxation at all levels.
1.3    Literature Review
Today, many businesses in Nigeria influence the output of the telecommunications sector; and various writers and authors have different opinions towards it. For instance, numerous advanced products in the financial services industry (internet banking, mobile banking etc.) rely heavily on internet access. Also, many on-line retail platforms have emerged and as far as telephony is concerned, the gap between the rich and the poor has virtually disappeared and only rear its ugly head in the choice of handsets or other gadgets that individual users deploy in communicating. For instance, a Nigerian entrepreneur in the sub-urban areas in 2014 is superior to top level government functionaries or top business executive pre-2001 by virtue of quality and quantity of information available to him through his handheld device.
The revolution in the telecoms sector has constantly challenged our imagination on the possibilities and associated benefits that a turn-around in the power sector can deliver to the Nigerian economy. There is profound envy of those who invested in the telecommunications sector to make this happen as if they did not deserve the returns on their investment. This is accompanied by the tireless feeling amongst Nigerians that the sector can still do more. Investments are still required to remove dropped calls, enhance faster internet access or connectivity etc.
As earlier noted, many treatises have been published on this subject matter, few of which are worthy of mention here. They include: Telecommunications in Nigeria: the next frontier by Ernest C.A Ndukwe[8], The Telecommunication Revolution in Nigeria[9] by Ernest Ndukwe, Telecoms, Media & Internet Laws & Regulations [10] by Udo Udoma & Belo-Osagie: Olajumoke Lambo & Godson Ogheneochuko; Tax Policy Reforms in Nigeria by Ayodele Odusola; Tax System in Nigeria – Challenges and the Way Forward[11] by Leyira Christian Micah, Chukwuma Ebere, Asian Umobong; Trends in Telecommunications Regulation[12]- Ashish Narayan (International Telecommunication Union); Taxpayers Rights Protection In Nigeria by Oluwole Oke (August 2012); The Constitution of the Federal Republic of Nigeria[13] (CFRN) and codified tax laws; The Federal Inland Revenue Service (Establishment) Act[14] (FIRS Act); Multiplicity of Taxes in Nigeria: Issues, Problems and Solutions[15] by Abiola Sanni; Tax policy reforms in Nigeria[16] by Odusola, Ayodele; Nigerian Tax Offences and Penalties[17] by M.T. Abdulraqaz........

[1] a small number of firms have the majority of market share
[2] According to Proshareng Technology, MTN a South African based multinational company has a market share of 37.21% in the nation’s economy.
[3] Leyira, L. M., Chukwuma E.  A.U& Asian  Tax System in Nigeria- Challenges and the Way Forward. Research Journal of Finance and Accounting, Vol. 3, No. 5, 9-15 (2012).
[4] A. Odusola, .  Tax Policy Reforms in Nigeria- Research Paper No 2006/3, United Nations University-World Institute for Development Economics Research. (2008)
[5] G.N Ogbonna,  Burning Issues and Challenges of the Nigerian Tax Systems with Analytical Emphasis on Petroleum Profits Tax. A Publication of the International Academy of Business and Behavioral Sciences, United States Of America (USA), Vol. 1, No. 1, 80-100.(2009)
[6] A statutory body established by virtue of section 1(1) of the Federal Inland Revenue service (Establishment Act) - No 13 of 2007.
[7] payments to various groups for approvals or security of their equipment or employees
[8] OFR, FNSE, FNIM, CEO (NCC) at the new age seminar; May, 2005.
[9] Lagos Business School’s Centre for Infrastructure, Policy, Regulation and Advancement (CIRPA) December 2011.
[10] 11th Edition of The International Comparative Legal Guide A practical cross-border insight into telecoms, media and internet laws and regulations
[11] A research paper for the Department of Accounting, Faculty of Management Sciences University of Port Harcourt, Nigeria
[12] ACMA ITU International Training Program July, Sydney, Australia
[13] Constitution of the Federal Republic of Nigeria 1999.
[14] Federal Inland Revenue Service Act (FIRSA)  2007.
[15] A research paper for the Department of Commercial and Industrial Law (University of Lagos), Nigeria.
[16] Research Paper, UNU-WIDER, United Nations University (UNU), No. 2006/03.
[17] 2nd edition; 2014 (Lagos State University).

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