Nigeria will find it impossible to place taxes on the transactions of foreign tech companies like Netflix, Facebook, Google, Youtube and other virtual firms without foreign help, Ikemesit Effiong, head of Research at SBM Intelligence, has said.
It will be recalled that the federal government announced its intent to tax OTT’s in the Finance act the president signed earlier in the year.
According to Saharareporters, the legal document, which reviewed the countries tax policies, included any business that “transmits, emits, or receives signals, sounds messages, images or data of any kind by cable, radio, electromagnetic systems or any other electronic or wireless apparatus to Nigeria in respect of any activity including electronic commerce, application store, high-frequency trading, electronic storage, online adverts, participative network platform, online payments and so on, to the extent that the company has a significant economic presence in Nigeria and profit can be attributable to such activity.”
Effiong told SaharaReporters that it would be difficult for the federal government to calculate the Nigerian derived earnings of these companies’ activities.
He is sceptical about how the government will, for example, find out the volume of activities engaged in by Nigeria’s estimated 20m Facebook users and how much each transaction yielded in revenue.
He said countries across the world were discussing how to tax over the top technologies (OTT’s) and virtual firms that do not have end-user telecommunication infrastructure and share the profit.
“The only way I see Nigeria being able to negotiate a tax regime (OTT) will be for them to collaborate with our European and American partners,” he said.
“I can’t think of any African economy – South Africa included– that can do this on their own. Even global powers like the US and the EU are struggling with this.”
Zainab Ahmed, minister for finance, gave clarity on how the government plans to implement the new tax regime by issuing the Companies Income Tax (Significant Economic Presence) Order. The finance minister is also empowered by the law to determine who a SEP is.
In the letter of the order, the first guiding principle in identifying who a SEP is will be to check if the company has sustained interaction with customers in Nigeria or agents of foreign entities based in Nigeria and have an annual earning in any currency whose value comes up to N25m or more.
Firms that fall into this category have been asked by the order to customize their platforms to enable them to receive payment in naira for taxable reasons.
“A foreign entity providing technical services such as training, advertising, supply of personnel, professional, management or consultancy services shall have a SEP in Nigeria in any accounting year if it earns any income or receives any payment from a person resident in Nigeria or a fixed base or agent of a foreign entity in Nigeria,” the act reads.
Education service providers are exempted though. Companies like Facebook, Twitter and Google, that make as much money off traffic as they do from promoted posts, would be difficult to tax, experts believe.
Most of these OTT firms do not have offices in Nigeria.
Those who do only maintain a representational presence and Effiong thinks this is the flaw in the plan.
“If Facebook says we had 17m unique visits, how are you as a country going to quantify and verify it?” he wondered.
Explaining that every taxpaying entity in the country has to open their books to the federal or state revenue boards, Effiong said OTTs have to largely comply, they have to be transparent about the number of Nigerian users they have, the ads those users clicked on, what the monetary cost of those ads was… for tax authorities to be able to assess them.”
Save for a Chinese/Iranian/Russian mode of internet monitoring, the lawyer said it would be impossible for the government to validate the genuineness of the data it is given.
Kenya is another African country that has attempted to levy an OTT. Its revenue authority said in a recent draft regulation that foreign companies offering digital services should register in the country to pay value-added tax or get a tax representative.
Outside Africa, France has been the most desperate to begin charging virtual firms for the number of undeclared profits they earn across the world.
In January, Macron’s government said it was going to go ahead of the EU conversation on the matter to collect three per cent of the global annual earnings of these firms.
That move was swiftly countered by the Trump administration, who threatened to massively heighten excise duties on goods coming out of France. Since then, Coronavirus has stalled the possibility of a joint tax regime for over-the-top technologies in the European Union.
Nigeria and Kenya are chasing the monies that could come from this new pull of cash though. It could be vital funding that would ease the recession fears in Africa’s largest economy.
NCC Says 78.9m Nigerians now Connected to Broadband
Nigerian Communications Commission (NCC) has revealed that the number of Nigerians connected to high-speed internet rose to 78.9 million in June.
The data from the commission showed that telecommunications operators in the country added 2.2 million customers to their broadband database in the month to raise the figure from 76.6 million recorded in May.
This raised the country’s broadband penetration from 40.14 per cent in May to 41.27 per cent at the end of June.
The steady growth in penetration has been attributed to the telecoms operators’ aggressive push for deployment of 4G service across the country. To extend the service to more Nigerians, the largest mobile network operator in the country, MTN, recently announced more investments targeted at building more 4G infrastructure
MTN said it planned to spend an estimated N600 billion on technical infrastructure over the next three years as it looks to expand its 4G coverage across the entire country by 2024
The Federal Government also recently launched a new National Broadband Plan (NBP 2020-2025) with a target of achieving 70 per cent penetration in the next five years.
This followed the expiration of the NBP 2013-2018, which delivered 31 per cent penetration as of December 2018.
Aside from the 70 per cent penetration target, the government in the new plan also raised the benchmark speed for broadband service in Nigeria to 25 megapixels per second, which is an improvement from the 1.5mbps benchmark in the 2013-2018 plan.
Gilat Telecom, Spacecom, Unite to Bolster Satellite Services in Africa
Spacecom, operator of the AMOS satellites fleet, and Gilat Telecom, a connectivity service provider, have announced a collaboration “to develop a faster, more reliable and more cost-effective satellite service for organisations of all sizes across Africa.”
The service uses Spacecom’s AMOS-17 fully digital and advanced High Throughput Satellite (HTS) on both C and Ku band, and Gilat Telecom’s unique SD-WAN MAX technology.
The companies add that the service, available immediately, can be used for home and office connectivity including video conferences, e-health applications, e-learning, e-education, etc.
They add that the collaboration will benefit African MNOs and ISPs in several ways including CAPEX savings and higher throughput at reduced operational costs.
“Spacecom’s AMOS-17’s HTS fully digital payload enables cross-connection between all beam and all bands enabling the use of existing equipment which can also be set-up remotely by the end customers (on existing or new terminals). Using Gilat Telecom’s intelligent routing, capacity can be expanded by up to 20% (the equivalent of 6 Mbit/s can be achieved from a 5 Mbit/s downlink),” the companies state.
Another benefit is smart traffic management. The companies explain: “Gilat Telecom’s SD-WAN enables service providers and MNOs to centrally control the route that both satellite and fiber traffic takes to and from the customer.
It enables different applications – voice, streaming, caching (Facebook, Netflix, Microsoft cloud services etc.) – to be identified with automatic prioritisation, according to the customer’s needs and demands.”
Dan Zajicek, Spacecom’s CEO said: “This partnership enables us to boost the services offered to customers along with fast returns on investments to these growing markets. We are sure this fruitful cooperation will lead us to many great business opportunities in Africa.”
Asaf Rosenheck, Gilat Telecom’s CEO also said, “We are an innovative company always focused on how we can improve the service we provide to our customers. Our partnership with Spacecom demonstrates how we work across the ecosystem to drive down costs and improve capacity”.
Encomiums as Sonny Aragba-Akpore Bows Out of NCC
It was encomiums galore recently as Management and Staff of the Nigerian Communications Commission (NCC) bid the Commission’s Head of Media Management and Public Relations, Sonny Aragba-Akpore, farewell following his retirement.
Aragba-Akpore, former Information and Communications Technology/News editor at the Guardian Newspaper, joined the service of the Commission in 2014.
Speaking at the valedictory party held in his honour on Thursday, which was attended physically and virtually by staff of the Commission, Prof. Umar Danbatta, executive vice chairman, appreciated the level of professionalism Aragba-Akpore brought to bear on his work at the Commission.
Represented at the event by Abigail Sholanke, director, Projects, Danbatta commended Aragba-Akpore for using his many years of industry experience and knowledge as a media professional and corporate communication manager to create a robust relationship with both mainstream and online media stakeholders, which, he said, has contributed significantly to the overall positive image and favourable public perception of NCC.
“On behalf of the Board, Management and Staff of Commission, we wish you a successful retirement and fruitful engagements in your future endeavours,” Danbatta said.
In his remarks, Dr. Ikechukwu Adinde, director, Public Affairs Department, said “within the short time I worked with Mr. Aragba-Akpore, I found him to be a man of uncommon passion for his work,” describing him as a very committed and hardworking colleague.
“We, therefore, wish you increased divine favour, as you retire from the services of the Commission.”
Other staff of the Commission, including directors, deputy directors, middle management staff, among others, took turns to talk about the favourable working relationship they had with Aragba-Akpore while at the NCC and wished him well in his retirement life.
Responding, Aragba-Akpore expressed gratitude to the Management and Staff of the Commission for their support and cooperation during his service and for organising a befitting valedictory ceremony in his honour, saying he enjoyed working with the NCC.
“This is one event I will not forget in a hurry. Indeed, I feel I am very lucky and singularly blessed and very appreciative of the privilege to work with a leading telecoms regulator like the NCC. For me, it is once-in-a-lifetime opportunity,” he said.
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