There are concerns that call and data tariffs may increase by as much as 100 per cent as the Federal Government plans to hike consumption tax on telecom services.
Daily Trust reports that the federal government had recently disclosed plan to implement a 5 percent excise duty tax on telecoms services, increasing the total consumption tax on telecom services to 12.5 percent.
The new tax regime, according to industry sources, will not only affect subscribers but also add tax burden on the telcos which would translate into rise in tariffs.
If the 5 per cent increment is eventually implemented, industry experts say, Nigerians will now be paying as much as N40 per minute call, up from about N20. And data tariffs could also go up to about N2,500 per gigabyte.
The finance minister, who unveiled the plan at a stakeholders’ forum on the implementation of excise duty on telecommunications services in Nigeria organized by the Nigerian Communications Commission (NCC), said the 5 percent excise duty was in the Finance Act, 2020.
She said the accrued taxes would be remitted on monthly basis, on or before 21st of every month. The move, according to the minister, was part of effort by the government to boost non-oil revenue in the face of dwindling income, especially from the oil sector.
The proposal has, however, set Minister of Finance, Budget and National Planning, Zainab Ahmed, and the Minister of Communication and Digital Economy, Prof Isa Ali Pantami, on collision course.
While the Ministry of Finance cites a presidential approval to apply the new excise on telecommunication services, as provided by the Finance Act, the Ministry of Communication and Digital Economy is kicking on the ground that the new tax would be harmful to the sector and to subscribers.
Telecom stakeholders, experts oppose
Also, Nigerian telecommunication consumers, under the aegis of the National Association of Telecoms Subscribers, have described the move by the federal government to increase the total consumption tax on telecom services, which include GSM to 12.5 percent as “irresponsible and ill-timed”.
According to the association, Nigerians are already suffering as a result of harsh economic conditions and another tax on telecom subscribers will further impoverish many especially as telecom services are essential to everyone.
President of Association of Licensed Telecom Operators of Nigeria (ALTON) Gbenga Adebayo, described the excise duty as unusual, saying that it will increase the burden on the telecom operators as they already have 39 other taxes that have been imposed on them.
Adebayo who spoke virtually at a forum last week stated that his association may not absorb the tax on behalf of the subscribers, noting that they will transfer the burden to the subscribers to pay higher prices for services.
The Executive Secretary of the Association of Telecommunications Companies of Nigeria (ATCON) Ajibola Olude also kicked against the proposed tax, saying that it does not comply with the principles of taxation which include fairness.
The implementation of the excise duty according to him will cause job loss; stressing that the proposed excise duty on all telecommunications companies is badly intended, he said.
Also the President of National Association of Telecoms Subscribers (NATCOMS), Chief Adeolu Ogunbanjo, lamented that sector is already heavily taxed with payment made on every recharge card coupled with the existing 7.5 percent VAT.
According to him, the new excise duty will cumulatively hike the tax to 12.5% including VAT, which will be a huge burden on Nigerians. The move, he said, is “insensitive and unpalatable”.
Ogunbanjo urged government to reverse its decision to increase the tax in the interest of the people as the telecom industry is the last hope of the common man and should not be destroyed.
A telecom consumer in Lagos, Mr. Lawrence Abi said that the masses may not feel the impact of the excise duty since it’s not on edible commodity.
He said, “As essential as communication is , how many people know how much they are charged per minute? More so, we have paid higher amount at the inception of the GSM. So it will not have effect on goods and services. We also have alternative to call such as WhatsApp call.
“By and large it’s better than additional loans for consumption,” he said.
However, the Nigerian Communications Commission (NCC) said there was no any immediate plan by operators to increase tariffs.
The Minister for Communications and Digital Economy had, last Monday, expressed dissatisfaction with efforts by the federal government to introduce excise duty on telecommunication services.
Pantami in his address at the maiden edition of the Nigerian Telecommunications Indigenous Content EXPO (NTICE) themed ‘Stimulating the development of Indigenous Content through innovation and commercialization’ holding in Lagos stressed the need for government and stakeholders to continue to support the sector, and not unnecessarily put burden on it.
“The Minister of Communications and Digital Economy is not satisfied with any effort to introduce excise duty on Telecommunications. When VAT was increased to 7.5percent, I was not consulted, I only heard the announcement and I think there is something questionable and I am glad that we are on the same page with our national assembly members. They too have not been consulted despite the fact that they are part of the committee.
“Beyond, making our position known, we will go behind the scene and go against any policy that will destroy the digital economy sector. This is a sector we cherish so much and we are ready to go to any extent, legitimately and legally to defend its interest.” he said.
When contacted yesterday, Pantami maintained his lack of support for the planned excise duty hike.
When asked to comment on why Pantami is not in support of the new tax hike, his spokesperson Uwa Suleiman directed Daily Trust reporter to contact the NCC for clarification on her principal’s statement on his lack of support for the excise duty on telecom services.
But when contacted, the NCC’s Director of Public Affairs, Mr Reuben Mouka said the “Minister had made his position public (at the Lagos event). He didn’t hide it.”
Why communication minister opposed proposed excise
A senior official of the ministry said Pantami is against the hike in excise duty on telecom services because it could drive away investors and increase hardship among Nigerian as telecoms might increase data and calls tariffs as a result of the tax.
In addition, Daily Trust gathered that the minister was bitter due to lack of proper engagement by the finance ministry on the issue.
“Yes, there was a letter from the Ministry of Finance informing us about the plan to commence the collection of the excise duty, but the minister replied to let them know we were not consulted and also emphasised how this law will increase the hardship of our citizens and is detrimental to the growth of the Digital Economy sector,” he said.
According to him, there was no proper stakeholder engagement by the finance ministry, including public hearing on the proposed provisions to enable all stakeholder provide inputs.
“We were not informed and the relevant committees in the National Assembly were also not informed,” he added. Another source at the ministry said the minister had promised the telcos that he would meet with President Muhammadu Buhari on the issue.
One of the telecom operators’ official told one of our reporters that no date had been communicated to them as the commencement date of the new excise duty.
“But you they may take us by surprise and start this month; we never can say”, the top telcos official who begged not to be named, told our reporter.
We’re consulting on implementation – Finance ministry
However, a spokesperson for the Minister of Finance said the ministry was in consultation with stakeholders on collection of the excise levies.
Responding to Daily Trust’s enquiry yesterday, the Special Adviser to the finance minister on media and communications, Yunusa Tanko Abdullahi, said the new tax regime said the excise collection ought to be with effect from June 1, 2022, which was the end of a three month moratorium provided by the ministry.
He said the minister had, “vide Circular dated 1st March, 2022 informed the Nigeria Customs Service and other Heads of Government Ministries, Departments and Agencies (MDAs), including the Federal Ministry of Communication & Digital economy on Mr. President’s approval of the implementation of the 5% excise duty on telecommunication services with effect from 1st June, 2022. The circular provided a ninety (90) day moratorium with effect from 1st March, 2022 before the implementation of the excise tax”.
Dr Tanko said the new provision is yet to be implemented due to “the need to ensure reasonable transition period before the implementation of the new tax, as well as provide clarity to all stakeholders on implementation modalities”.
He reiterated that the excise was hinged on the provisions of Finance Act, 2020 which “introduced “Telecommunication Services” provided in Nigeria to be liable to excise duty under Section 21 (2) of the Customs and Excise Tariff Etc. (Consolidation) Act, CAP. C49, LFN 2004. It, therefore, means that all stakeholders have by that singular provision aware of the Act”.
He said the ministry was working with stakeholders including Manufacturers Association of Nigeria (MAN) and Association of Telecom Operators of Nigeria (ALTON) on modalities for implementation of the excise duty.