Ben Akabueze, director-general of the Budget Office of the Federation, stated recently at a World Bank event in Abuja, where the need for the government to raise additional revenues was discussed, that Nigeria is considering introducing an excise tax on telecoms airtime charges.
Akabueze said, “Last year, we found that 51 countries in Africa have excise on airtime charges, so we are looking at that as well as an area (to tax)”.
The telecommunication sector in Nigeria, which in the last five years has been a major driver of the digital economy agenda of the Federal Government, has been undergoing the challenges of multiple taxations and levies from the federal, state, and local government authorities.
Recall that Nigerians had fought similar moves in 2019 by the federal government to introduce the so-called Bill entitled ‘Communication Tax Bill, 2019 (SB.12)’, sponsored by the Chairman of the Senate Committee on Army, Senator Ali Ndume.
Key highlights of the Bill were electronic communication services that would be subject to the levy include voice calls, SMS, MMS, data usage (both from Telecommunication Services Providers and Internet Service Providers), Pay per View TV Stations, etc. The tax was to be paid together with the electronic communication service charge payable to the service provider by the user of the service.
The tax is payable, whether or not the person making the supply is permitted or authorised to provide electronic communications services.
All service providers are expected to file monthly returns not later than the last working day of the month, immediately after the month to which the tax returns and payment related. Penalty for failure to file returns on or before the due date is N50,000, and an additional N10, 000 for each day the returns are not submitted, among others.
The Bill was later suspended by the 8th National Assembly following the intervention of the Association of Telecommunications Companies of Nigeria (ATCON), led by Engr. Olusola Teniola, to the former Senate President, Bukola Saraki, on Thursday, November 3, 2016.
The Bill was jettisoned, as it was acknowledged by the distinguished Senators that the growth of ICT is critical to the creation of jobs and reduction in youth unemployment.
Even though the telecommunications sector has continued to provide the sinews that support the nation’s economy, businesses, and individuals during the COVID-19 pandemic and its attendant restriction period, it is still being over-burdened with multiple taxes and levies.
ATCON then recommended to the 8th National Assembly and government that the tax base of the country should be widened to include more taxpayers, as only 13 million out 70 million were contributing to the tax revenue of the federal government.
“Therefore, we understand that measures to shore up government income in the way of taxes should be explored. However, the government needs to also consider a reduction in the cost of governance that will fit within the new government revenue generated through taxes and oil receipts. It is inconceivable that a CST Bill of 9% that was put aside, which is a direct copy of Ghana’s CST, is now being pushed again through the National Assembly, without due consultation with all stakeholders, and it is especially targeted at the telecoms and ICT sector.
“The impact of the adoption of 9% CST Bill is that it is a double tax on voice, SMS and data service, as 5% VAT already applies on these services. This represents an additional burden when applied to a subscriber base of 173 million. If the passage of this Bill goes through, it would negatively impact Nigerians and foreigners that use these services. The implementation of this CST Bill would take the affordability of data services out of the reach of the citizenry.
“Therefore, ATCON recommends that government reconsiders the passing of the Bill, as it would add to the burden of the already suffering Nigerians. It is deemed as an additional multiple taxes, loss of revenue to the industry, and can lead to loss of jobs in the sector.
“We reiterate that the burden of shoring up government revenue should be across all segments of society in the way other climes use VAT, and not to be targeted to a specific sector.”
Examples of some multiple taxes include Companies Income Tax, Information Technology Tax (NITDA Levy), Education Tax, Nigerian Content Development Levy, Base Station Tax, Right of Way, all of which are based on income or profits and Value Added Tax, Sales Tax and Hotel Consumption Tax, Environmental Audit Review and Certification Fee, Safety regulation Tax, amongst others.
However, the sector, through the regulatory regime of the NCC, under the leadership of its Executive Vice Chairman, Prof. Umar Danbatta, saw the telecoms investments grow from about $38billion in 2015 to over $70 billion currently.
The National Bureau of Statistics (NBS) said the telecommunications companies in Nigeria paid a total of N148 billion as Company Income Tax (CIT) in the first quarter of 2020.
According to the NBS, the CIT from telecom and professional services represented 23.5 percent of the total CIT paid to the government in nine months, which stood at N628.6 billion.
A breakdown of the payments for the three quarters showed that N28.8 billion was paid as CIT by the companies in the telecom sector in the first quarter of 2020, second quarter N63.8 billion, and third quarter N55.5 billion.
Going by the letters and spirit of the new Finance Act which now subject all multinational digital companies operating abroad with significant economic presence in Nigeria to taxation, the Over-The-Top (OTT) services providers such as YouTube, Facebook, Twitter, WhatsApp, Blackberry Messenger, and many others, have been caught on the web of Twitter’s suspension. They are now required to register, declare the revenue they generate from Nigerian consumers, and pay taxes, which they never did before now.
Recall also that the Association of Licensed Telecoms Operators of Nigeria (ALTON) had raised this issue of the Over-The-Top (OTT) services severally before this position by the government came to the fore. ALTON said that the OTTs were comfortably appropriating the revenue of the telecommunications industry by de-layering that space and as at last count, have ripped off about N370 billion from the revenue of telecommunications operators in the country.
Consequently, ALTON, reacting to reports that the federal government was considering an excise tax on telecoms airtime charges, has also warned against the fresh plan to introduce excise duty on telecoms’ airtime charges, arguing that it will lead to double taxation.
Read Also: Telecoms Operators Decry Hike in Charges
Adebayo stated that the proposed tax will amount to double taxation because there is the existing Value-Added Tax (VAT) on all telecom’s airtime recharges. He said:
“It is not clear to telecom operators why the federal government wants to introduce an excise tax on telecoms airtime recharge. Excise duty is introduced in manufacturing goods and it is introduced when the government wants to reduce the intake of such manufactured product. Except the federal government wants to discourage the importation of recharge cards into Nigeria to encourage telecom operators to use alternative means of vending airtime, like the virtual top-up that does not need a physical recharge card.
“For example, it will be understandable if the federal government decides to introduce an excise tax on consumption of tobacco products because it wants to reduce the consumption of tobacco in Nigeria because of the health implications. But it will be out of place for government to introduce an excise tax on telecoms airtime.”
He argued that the telecoms sector remains the only sector that has not increased charges on services and airtime charges since the launch of Global System for Mobile Communication (GSM), and warned that any attempt to introduce an excise tax on telecoms airtime recharge would negatively affect telecoms services offerings across networks.
“Government should be careful not to introduce additional burden on telecom operators,” Adebayo said.
The operators have alleged that there are over 38 different taxes and levies on their operations by the various tiers of government in Nigeria and different government agencies, and consider the news of more taxes as a threat to not only their businesses, but to further investments in the industry.
They said the government has a right to impose taxes on businesses, but they expect that taxes in the telecommunications industry should be aligned with other industries and in line with international best practices.
Gbenga Adebayo, Chairman of ALTON, however, said that since the purpose for the planned introduction of excise tax on telecoms airtime charges were not clear to industry players, telecoms operators would rather wait to see how the federal government intends to introduce it.
Analysts are of the view that uncertainties over taxes and levies affect investment decisions, and the anticipated taxes and levies in the telecommunications industry may expectedly be built into the cost of services and products and ultimately passed on to subscribers.