Pantami vs Zainab: Is New Duty on Telecom Service Justifiable?
By Fom Gyem
TECHDIGEST – In order to raise money, the federal government through the finance ministry, and the Nigerian Customs Service (NCS) have suggested a 5% excise duty on telecommunications services such as calls, SMS, and internet services.
This proposal is reported to be a component of the new Finance Act that President Muhammadu Buhari signed into law in 2020.
While the Minister of Communications and Digital Economy Isa Pantami is strongly against the new telecom taxes, the minister of finance, budget and national planning, Mrs Zainab Ahmed, insisted that the excise duty on telecommunications services is inevitable.
In rejecting the new tax on calls and data, Professor Pantami said that the move would impact the sector and Nigerians negatively. Speaking in Lagos at the maiden edition of the Nigerian Telecommunications Indigenous Content Expo organised by the Nigeria Office for Developing the indigenous Telecom Sector, an agency domiciled in the Nigerian Communications Commission, the Minister stated that the telecom sector already contributes a lot to the Nigerian economy and urged the government to consider taxing other sectors of the economy that were not contributing to national development.
He said: “Firstly, I have not been consulted officially and part of the rulemaking is to invite stakeholders to make contributions, I was not consulted officially. Secondly, if we have been contacted, we would have challenged the submission.
“The sectors that are contributing to our economy today are few. What we should be doing is to ensure that all other sectors can also contribute. A lot of sectors are consumers, these are the sectors that we should be tasked to contribute.
“Excise duty is introduced to discourage the consumption of certain commodities like alcohol, and tobacco. But today, without broadband penetration, how can you perform financial transactions, how can you deliver lectures without that, how can you work in a hospital, these services are a necessity.”
According to him, telecom companies contribute 2 per cent excise duty to the NCC already. He stated that telecom consumers also pay 7.5 per cent for consuming telecom services.
Meanwhile, the minister of finance, budget and national planning, Zainab Ahmed said the federal government is on course to implement the five percent excise duty on telecommunications services.
In a statement by her media aide, Yunusa Abdullahi, Zainab noted that all relevant agencies, including the communications ministry, were informed of the implementation of the tax approved by President Muhammadu Buhari.
READ ALSO: Finance Minister insists on 5% Telecom Tax
“Against the comments by Isa Ali Pantami, honourable minister of communication and digital economy, concerning the five percent excise duty hike on telecoms services, it is worth noting that there was a circular stating the planned hike which was addressed to the communication minister and other relevant ministries and agencies of government,” the statement reads.
“The circular Referenced No. F. 17417/VI/286, dated 1st March 2022, and titled “Approval for Implementation of the 2022 Fiscal Policy Measures and Tariff Amendments” was addressed to different ministers, including the honourable minister, communications and digital economy and other heads of government agencies.
“Although Nigeria is celebrated as the largest economy in Africa, translating this wealth into revenues remains a challenge. Considering this in line with the provision of the revised National Tax Policy, which provides the framework for a sustainable tax system that would ensure reliable sources of revenue to government and support economic development.”
Contributing to the debate, the Association of Licensed Telecoms Operators of Nigeria (ALTON) said that the most recent plan portended the end of operators because there were already 39 charges being imposed on them.
According to them, the excise duty is a production tax that finally gets transferred to consumers. The new levy would essentially raise the consumption tax on Telecommunications services, such as phone calls and internet data, to 12.5% from the current 7.5% VAT rate. According to the Nigerian Communications Commission (NCC), the sector contributed N3.25 trillion in income in 2021, and based on the sector’s growth rate so far in 2022, the new tax is expected to collect N200 billion over the course of the following year.
The collection and submission of telecom taxes are the responsibility of telecom firms at the federal, state, and local levels. They are significantly more regulated and thorough than a typical sales tax, despite the fact that they may be seen as a kind of sales tax or excise tax on telecom services. Only the petroleum and rental vehicle businesses, which focus on specific products, are taxed more heavily than the telecoms sector.
When all federal, state and local taxes are considered, there are hundreds of different tax kinds and bases that result in hundreds of thousands of various potential filing obligations. Numerous businesses that offer communications services are subject to telecommunications tax responsibilities. This involves a growing number of businesses as technology develops more quickly than legislation.
Governments rely heavily on tax revenue from the telecommunications sector, and operators are commonly the target of tax officials conducting audits to confirm respect for their tax duties. Taxes and levies, however consequences on telecommunications operators have a negative service offered by operators in terms of utilizing services, Pricing, investment choices, service quality, and service affordability. High tax rates and fees are inextricably linked to investments made by operators in infrastructure and machinery, the level of service quality, and the price offered by the subscribers.
One of the important areas of the information and communication technology (ICT) sector is the telecommunications subsector and Nigeria is the largest telecom markets in Africa. Surprisingly, the Mobile Network Operators (MNOs) providing telecom services in Nigeria are currently subjected to more than 40 distinct taxes and levies.
Over time, the Nigerian telecommunications industry developed into an oligopolistic market structure. It is impossible to overstate the value of telecom airtime and data in the complex environment we live in today. Nigerians continue to suffer excruciating pain as a result of the aggressive taxation of the country’s telecom industry, which has caused network quality to deteriorate.
The necessity to guarantee that the government is not overly taxing basic requirements arises from the fact that, if Abraham Maslow’s Hierarchy of Needs theory had been founded today, telecom airtime and data could have been correctly classed alongside food and shelter as physiological needs.
Prepaid services or a minimum monthly amount, for instance, could have been excused. Telecom services such as broadband have become a necessity and without them, nothing could be done in various sectors, and introducing the excise duty wouldn’t be beneficial to Nigerians as the economy isn’t friendly.
If the government insists on imposing the new telecom tax, Nigerians will undoubtedly experience more negative effects as a result because the timing is wrong and any extra hardship on citizens won’t be tolerated.
I also agree that the government must extend its net to other sectors as it hopes to increase revenue because the telecom industry is already doing enough and will only crash if any further taxes are added.
Each sector must contribute a certain percentage to the economy rather than relying on a single sector.
Fom Gyem writes from Wuye District Abuja