Telecoms Operators Fret over Proposed 9% Communication Services Tax

Services Tax

The Organised Private Sector (OPS) has expressed concerns over the proposed plan by the federal government to impose a special tax of nine per cent for the use of communication services, noting that this move would only succeed in worsening the prevailing high cost of doing business in the country.

The operators under the telecommunications arm of the Lagos Chamber of Commerce and Industry (LCCI) said the economic implications of this bill would affect consumer purchasing power which they say negates the principle of neutrality, maintaining that it would also discourage investment and impede development of the telecommunications sector.

They posited that the bill potentially creates and raises the issue of double taxation since Value Added Tax (VAT) Act already imposes tax of five per cent on the supply of goods and services, calling for the suspension of the bill to allow for the rapid growth of the telecommunications sector in line with the Nigerian National Broadband Plan.

However, the Minister of Communications, Mr. Adebayo Shittu, stated that the bill which is before the Senate and House of Representatives, have commenced the legislative process to enact the bill which he said has passed its first reading.

The minister during the private sector dialogue session on the proposed communication services tax bill organised by the LCCI, stated that according to many schools of thought, the bill seeks to impose additional charges on users of electronic communication services in Nigeria.

He added that the proposed national ICT roadmap is poised to set out the intent and commitment of the government to continue the development of the ICT sector and implement the sector policies and plans in an integrated, focused and innovative manner that aligns with the change mantra of the current administration.

Shittu pointed out that the present administration’s goal is to provide cost effective, ubiquitous ICT access for overall national development, stating that as government plans to increase revenue, makes the bill worthy of consideration.

“I have been reliably informed that the projected earnings from this effort is over N20 billion every month, which is an attraction to the government in funding our budget deficits. I must be quick to say that this government has got a human face twined around its decisions,” he said.

The president, LCCI, Dr. Nike Akande, acknowledged the fact that the government is seeking to diversify its revenue base in the light of the dwindling oil revenue, but stressed that the private sector players would like to see an investment friendly tax environment, especially in the light of the prevailing high cost of doing business in the country.

She said the ICT sector is very strategic to sustainable growth and development, adding that the sector has witnessed an impressive growth over the last one decade.
She said according to the Nigerian Communications Commission (NCC), Nigeria has become the largest telecoms market in Africa and the Middle East.

Meanwhile, the Partner, West Africa Tax Leader, PWC, Mr. Taiwo Oyedele, said the timing and the concept behind the bill could have been better, saying that making decisions without empirical evidences will only lead to wrong decisions.

He added that engagement with stakeholders in the industry and the users of the services have not been taking into consideration, saying that stakeholders must give their views before such bill is passed into law.

In another development, Shittu has said government would realise N240 billion annually from the proposed Information Communications and Technology (ICT) service tax to be introduced by government.

The ICT service tax bill which is currently pending before the National Assembly will apply to voice calls, SMS, MMS, data and pay viewings channels.

While urging for support for the quick passage of the bill, he said, the money generated from the tax will be used by government in funding its deficit budget.

He said: “Our appetite as a government to increase revenue makes this bill worthy of our consideration.

“I have been reliably informed that the projected earnings from this effort is over N20 billion naira every month, which is an attraction to the government in funding our budget deficits.

“I must be quick to say that this government has got a human face twined around its decisions.”

This was contained in a statement signed by Mr. Victor Oluwadamilare, on behalf of the minister, in Abuja, said the extra 9 percent tax to be paid by subscribers of telecommunications service.

While admitting that the proposed tax has generated some concern, he said: “The proposed bill said a section of the stakeholders have extrapolated that the bill seeks to impose additional nine per cent charges on users of electronic communication services which is to be remitted to the Federal Inland Revenue Service (FIRS), on a monthly basis.

According to him, the International Telecommunications Union (ITU) gave Nigerian the mandate to achieve 30 percent broadband penetration by 2018, adding that the target is only two years away.

“In spite of the huge investment by the government and industry operators, Nigeria has achieved only 10 per cent broadband penetration at the moment.

“If we are to catch up with lost ground and meet up with the expectations of the global community in the area of affordable broadband service, we have to incentivize the populace by helping to aid access to low cost data service subscription.” he said.

Shittu, however urged stakeholders in the sector to have a holistic deliberations on the communication services tax as being proposed in the ICT bill pending before the National Assembly.

The minister, said the goal of the ministry is to provide cost effective ubiquitous ICT access for overall national development, adding that the proposed solutions are the passage of the Critical National ICT sector infrastructure bill, hastening of the rollout of metro fibre networks, use of NIGCOMSAT Satellites to bridge the rural penetration gap and hosting of critical National Data within the country.

About the Author

Samed Olukoya
Samed Olukoya is the CEO/Founder of investorsking.com, a digital business media, with over 10 years' experience as a foreign exchange research analyst and trader. A graduate of University of East London, U.K. and a vivid financial markets analyst.

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