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Wednesday 13 November 2019
BUSINESS DAY
interview ‘Telcos are the hardest hit by heavy taxes and levies’ Rotimi Akapo, a partner at Advocaat Law Practice and an expert in telecommunications law, in this interview with Jumoke Lawanson, speaks on the legal implication of multiple taxation, illegalities of shutting down base stations, data protection and privacy, amongst other issues. Excerpts: Operators in Nigeria’s telecommunications industry have continued to lament the huge tax burdens, especially levies unrelated to the sector. What is the legal implication of overburdening a particular industry with taxes and levies? he foundation for any tax should be a law authorising that particular type of tax. Unfortunately, in the telecommunications industry, we have come to identify two different types of taxes: the normal tax that all companies that operate in Nigeria pay, such as the companies income tax, pay as you earn, contributions to pension schemes, and some other levies charged on various things. There are also specific, sector-focused taxes and levies that are only paid by telcos, such as the AOL, spectrum fees, numbering fees and others paid to the Nigerian Communications Commission (NCC). As at the last count, there is a minimum of 38 different taxes and levies that are paid by telcos. These exclude some of these taxes that are just levied by local governments that creep up on them. The way Nigeria is structured – because we operate a federal system of government, certain things are on the exclusive list while other things are on the concurrent list. The federal government is responsible for making laws on the exclusive list. In that respect, for telcos there is a schedule in the taxes and levies act that lists all the taxes that everybody is supposed to pay, including telcos. So it is up to the telcos to identify those specific taxes that are applicable to them. In a sane country, that is what should happen. However, what is happening in Nigeria is that apart from the taxes on that list, states have the responsibility of making laws on the concurrent list and that is where you have things like urban planning levies, etc. A lot of states are now using that opportunity to start imposing all sorts of different levies. Recently, there was a court judgment against one state that made a law stating that base transceiver station (BTS) sites which only host equipment were business premises. IHS went to court to challenge this and the court granted that the BTS sites are not business premises. When state governments make a law, they try to make it legal but what happens is that even though the fees are legal, telcos usually get higher pricing for those fees which are unreasonable even though it is a legal fee. So we see cases where the request itself from the ab initio is legal but the amount of money they are being charged is unreasonable and if the telcos don’t pay, the law is not followed when trying to get the money for the government. What is supposed to happen is that due process should be followed and defaulters should be taken to
have been done in the first place. The first thing is the cybercrime act provides that the president, based on the advice of the national security adviser, can designate telecoms infrastructure as critical national infrastructure and once it is declared critical infrastructure and someone tampers with it, they can get up to 10 years in prison, but that has not been done. There is a critical national infrastructure bill that has been with the National Assembly since about 2014 or 2015 and the bill has not been passed. So the legal framework is not there, that is why everybody thinks that they can mess with telecoms infrastructure. If the framework was completed, then telcos will have a legal basis for prosecuting people that tamper with infrastructure. What is being done now is an ad hoc thing that they can accuse people of committing trespass or damage to the site, but for now, those sites are still not regarded as critical infrastructure. For the NCAA, I think it is just a threat so that they can get the telcos to come to the table and negotiate something because all those BTS sites are not new, they have been there since when telecommunications licences were issued.
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Rotimi Akapo
court but what happens in Nigeria is that strong-arm tactics would be used by either shutting down base stations or locking up offices. So, telecoms operators are specifically targeted because everybody thinks they are making so much money. They look at the revenue but never look at the outgoings. There seems to be no synergy between state and federal governments, and telcos have struggled with multiple taxation from all levels of government. What’s your view on this and how best can these issues be rectified? Synergy between different levels of government is very critical, because what a lot of people don’t understand is that, as a lawyer, I believe in certainty. If I am starting a business, I want to be aware of all my obligations to the government. If that list changes every day, then it is difficult for me to advise my client. For example, the federal government stipulates that Right of Way (RoW) of about N145 per square metre should be paid as a one-off fee; however, some state governments demand annual renewal. Unfortunately, I think our problem stems from the fact that we operate a federal system of government and these states believe that because they are autonomous and they are independent, they can determine whatever they want to do. For example, Lagos State has signed a memorandum of understanding (MoU) with the telcos and they agreed on N500 per linear metre, so you can imagine if an MTN, for example, pays N145 on federal highway and in Lagos www.businessday.ng
which is a commercial capital, where they probably make a lot more revenue than a lot of other states, they pay N500 and then they are now asked to pay up to N4,000 in another state, for example. It becomes entirely disjointed. The federal government has tried to bring a lot of these state agencies to work together with them so that there will be a framework. It doesn’t have to be exactly the same amount in all states, because the costs of doing business in different states vary but there needs to be a framework where all government agencies will agree on price points. However, they have not been able to achieve that because everybody sees telecoms as a cash cow and they want a big bite of the apple but they are not being realistic. This is mainly because government agencies are very short-sighted. We have to realise that the telcos will push all these costs to the customers who are the end-users, or they would simply walk away from operating in a particular state and then it is your citizens that would suffer poor service and not have the kind of facilities needed for development. What are the legal implications of shutting down telecommunication base stations and sites which have been identified as critical infrastructure, and what impact does that have on quality of service? Clearly it is illegal. In fact, to even say that you are going to shut down BTS sites, particularly those close to airports, is reasonable because you are putting people’s lives at risk. However, a few things need to
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Would you say that taxes and levies in Nigeria are broad-based and fairly distributed, or are some specific industries such as telecommunications operations being targeted with high taxes? The telcos are the hardest hit by these heavy taxes and levies. Another industry that might have suffered a similar fate is the petroleum industry. The informal levies target the petroleum and telecoms industry. Because of the nature of their operations, the telecoms operators need to be all over the place in every part of the country and because they are everywhere, they are easily targeted to pay those taxes and levies. With telcos handling data of over 170 million mobile network subscribers, do you think Nigeria’s data protection policies are of world standard, especially as there is no specific or comprehensive data privacy or protection law in Nigeria? How important is it for us to have specific policies such as the GDPR in the EU? I think the challenge in Nigeria is that there is not a single law providing for data protection, privacy, and related matters. What has been done over the years is people have been looking for either sectorspecific guidelines or regulations. In January 2019, National Information Technology Development Agency (NITDA) issued the national data protection regulation, and that is the most recent instrument in that area. Prior to that, the telecoms industry with NCC as a forward-looking regulator had the consumer code, and in that code, @Businessdayng
there were quite a few provisions on how you should deal with data of consumers. There is also the SIM card registration regulation which provides for how personal customer information should be dealt with and for how long they can keep it and how they need to transmit it to the NCC. One of the important provisions of both the consumer code and the subscriber registration regulation is that third parties must not have access to any information with the mobile network operators without the consent of the data subject. And it goes further to provide that they cannot take such data out of the country without the consent of the NCC. So to some extent, for the telecoms subscribers, there is some sort of protection, but because these are from guidelines and regulations, even though they have some force of law, it would still be preferable if there was a specific law for data protection. Because if you look at the UK for instance, there is an independent body that is responsible for data protection which is the information commissioner’s office but we don’t have anything like that here. From a legal perspective, how is Nigeria doing in terms of regulation of network infrastructure, consumer protection, competition, universal access and resolution of industry disputes? Is there even a legal framework for telecommunications in Nigeria? Because government has not provided the backbone telecom infrastructure for MNOs, these operators have had to invest heavily in building infrastructure in the country. What the NCC is now doing in terms of infrastructure is to have a level playing field by licensing infrastructure companies (InfraCos). If the seven licensed InfraCos take off and things go the way they are supposed to go, there would be some sort of balancing; because we would now have an independent third party that has the infrastructure and all telcos have to do is just plug to the source. One of the licensing terms for the InfraCo is that it is an open model, so all operators would be charged the same rate. So it must be fair, equitable and non-discriminatory. For competition, to a large extent, I think the regulator is doing its best. In 2010 and 2013, the NCC did some competition study to try to determine if the telecoms industry in Nigeria is competitive, and based on those studies, certain decisions were taken. For example, I think the 2013 study discovered that MTN was dominant in voice, so there were certain decisions that were taken such as the rule that there must be accounting separation, so the money made from voice should not be used to subsidise money made from data. I hear that there might be another study very soon.