Worrying trend in government, business relations  

Recent experiences of private businesses point to a worrying trend in relations between government and private businesses. Government agencies are resorting to multiple taxation of private businesses as a means to increase their revenue base.

 

In October 2018, insurance companies at a one-day seminar decried the multiple taxation they were being made to pay, and asked the industry stakeholders to unite against what they termed as “a threat to the well-being of the industry”.

 

For the two financial years before 2018, insurance companies had lost N23 billion to multiple taxation. A Leadership newspaper investigation revealed that, “Apart from paying tax on management expenses, short term lending, among others, insurers were also mandated to pay tax on claims…meaning that, the higher the claims paid by an underwriter, the higher the tax to be paid on such claims.”

 

At a seminar in July last year the Apapa, Lagos branch chairman of the Manufacturers Association of Nigeria (MAN), Mr. Olakunle Obadina, complained that its members were being taxed multiple times by regulatory agencies of the Lagos state government.

Read Also: https://businessday.ng/markets/article/traders-groan-over-multiple-levies-in-akwa-ibom/

 

It appears Nigeria’s insurance companies and MAN are not the only ones bedevilled by this anomaly, even telecommunications operators under the Association of Licensed Telecommunications Operators of Nigeria (ALTON), are equally overburdened.

 

Early 2018, ALTON raised objection to the Amended Taxes and Levies Order, 2015, claiming that the Act failed to fix the taxable rates, and had led to the imposition of new arbitrary levies and charges on telecom firms by state governments.

 

ALTON chairman, Mr. Gbenga Adebayo, said his association believe the amended Act engendered the institution of multiplicity of taxes across different levels of government, adding that “The industry is also burdened with enactment of laws at the state government level to legitimise spurious levies and charges on our members, which negates the ease of doing business in Nigeria.”

 

It didn’t take long before the import of this objection to the amended Taxes & Levies Act became clearer. In a letter to MTN Nigeria in August 2018, the Central Bank of Nigeria (CBN) ordered the firm to refund the sum of $8.1billion being dividends the apex bank claimed MTN repatriated overseas between 2007 and 2015.

 

CBN alleged the Certificates of Capital Importation (CCIs) issued on behalf of some of MTN’s offshore investors for the remittance of foreign exchange were illegally done by some of its bankers, and without the approval of the CBN as required by law.

 

The Attorney General of the Federation’s office would back CBN in this attack with allegation MTN was owing $2 billion in back taxes, for a period of over ten years and related to foreign equipment brought into the country and payment to suppliers of said equipment by MTN.

 

Joining the train to take a bite at MTN, last week Thursday, the Kogi State Internal Revenue Service (KGIRS) for the second time, shutdown MTN Nigeria’s facilities over claims that the telecommunications giant failed to pay tax obligations to the tune of N120 million to the state government.

 

On these three occasions, MTN vehemently denied any wrongdoing.

 

In the case of CBN, MTN refuted all allegations and sought judicial intervention on the matter, challenging the apex bank’s actions. In a statement, MTN claimed that no dividends have been declared or paid by it, other than those it did pursuant to the CCIs issued by its bankers and with the approval of the CBN, as is required by law.

 

MTN also countered the Attorney General’s claim with a report in August showing results of an internal assessment that revealed $700 million paid to tax authorities. After the AGF rejected this assessment, MTN took the matter to court to seek redress. The case was later slated for hearing on December 3rd, 2018, and remains so.

 

What the claims by insurance companies, ALTON, MAN and these three experiences of MTN point to is a worrying predatory trend where government agencies at state and federal level either make arbitrary laws or circumvent existing ones as an excuse to prey on organisations that are doing genuine business.

 

The Kogi state government is demanding from MTN the immediate payment of Social Service Contribution levy, Employee Development levy and annual rent for Right-of-Way on fibre optics cable, without the Minister of Finance’s recommendation as is required by the Taxes and Levies Act.

 

MTN’s Corporate Relations Executive, Tobechukwu Okigbo, in a statement said, the organisation has on multiple occasions furnished the KGIRS with documentary evidence proving the telecommunications giant full compliance with extant state laws on the matter.

 

“At this stage, the demands of the KGIRS, if honoured, amounts to multiple taxation and the arbitrary shut down of our base transceiver stations and harassment of our partners will stand in the way of a reasonable resolution”, according to Okigbo.

 

These arbitrary actions by agencies of some states and federal government are deterring Foreign Direct Investments (FDI) inflow into Nigeria. Already the country has lost its top destination spot for FDI in Africa, trailing South Africa, Morocco and Kenya in Ernst & Young’s latest Africa attractiveness report, titled ‘Turning Tides’.

 

In light of the perception the MTN vs CBN issue was creating in the eyes of foreign organisations looking to invest in Nigeria, the CBN at every opportunity allayed the fears of stakeholders, eventually resolving the issue “amicably and equitably”.

 

Officials of the Nigerian Communications Commission (NCC) are said to be in talks with Kogi state top officials to resolve the MTN Kogi shutdown.

 

At the insurance seminar in 2018, stakeholders had asked the federal government to review the tax regime that concerns the sector, a request which the Federal Inland Revenue Service (FIRS) assured the insurers was already being looked into.

 

Though these are commendable steps, still, this is not the way to treat organisations that have become a strong part of the backbone of the Nigerian economy.

 

This worrying predatory trend where every government agency at the state and federal level view private organisations as the proverbial national cake and therefore wants to take a bite at them to raise their internal revenue is bad for business and has to stop.

 

Ayobami Adekojo

Communications strategist and public affairs commentator. He wrote via [email protected]