No To Proposed Telecoms Tariff Hike

Telecommunications consumers in Nigeria may need to constrict their belts in the days ahead as the Federal Government has completed plans to impose a five per cent excise duty on all telecommunications services ranging from calls, SMS, and data services.
The Minister of Finance, Budget, and National Planning, Mrs Zainab Ahmed, disclosed this at a stakeholders’ forum on implementation of excise duty on telecommunications services in Nigeria in Abuja. The event was organised by the Nigerian Communications Commission (NCC). Since the disclosure, Zainab has been pressing that the scheme must be implemented as proposed despite opposition by stakeholders.
According to reports, the five per cent will be added to the already existing 7.5 per cent Value Added Tax (VAT) on telecommunications services. Zainab said the five per cent excise duty is a provision in the Finance Act 2020 but was not carried out. She attributed the delay of its implementation to government’s engagement with stakeholders. The proposed tax, if enforced, will increase impost in the sector to a total of 12.5 per cent.
Like many other countries around the world, Nigeria’s economy has been hit by the COVID-19 pandemic, insecurity and the recent ongoing Russia-Ukraine war. A recession is imminent, food shortages are looming, chronic oil theft continues to compound the problem, leaving the mono economy huffing and puffing.
The 36 state governors have chimed the alarm that they may not be able to pay workers’ salaries in the coming months because of the fast depleting income in the federation accounts. Following these concerns and more, the Finance Minister has seen telecommunications as a sub-sector with the magic wand to save the collapsing economy. The Federal Government must realise that Nigeria’s fiscal challenge is not generaion but reckless expenditure.
The present economic realities in the country render the introduction of such taxes unrealistic and insensitive. The Finance Minister should pay very close attention to the comments of the Minister of Communications and Digital Economy, Prof Isa Pantami, who described the proposed tax as “ill-timed”. Pantami deserves commendation for being on the side of the masses who are suffering the worst economic policies in the history of the country.
At the maiden edition of the Nigerian Telecommunications Indigenous Content Expo (NTICE) organised by the NCC in Lagos, Pantami said he had not been informed officially about the proposed excise duty and promised to challenge the decision. This is an indication that President Muhammadu Buhari’s government is working at cross purposes. Although the government will make about N165 billion annually from the tax regime, the decision will impoverish millions of Nigerians.
Excise taxes are usually imposed to discourage the consumption of certain goods such as alcohol and tobacco. In a digitized world, increased taxes on telecommunication services like calls and data will inhibit social interaction and the provision of goods and services. This will adversely affect learning as many institutions now conduct lectures through online channels. It will also limit access to information and participation.
Our standpoint on the mooted tax is consistent with Pantami’s perspective. We reject it because it is insensitive and coming at the wrong time. The scheme would negatively impact the sector. Having observed the immense contribution of the telecom industry to the economy, we urge the Federal Government to rescind the decision forthwith. Such imposition would further aggravate the agony of the Nigerian masses who have already been shoved into adversity and intense poverty.
Similarly, major stakeholders in the sector are kicking against the initiative. The Association of Licensed Telecoms Operators of Nigeria (ALTON), Association of Telecommunications Companies of Nigeria (ATCON) and National Association of Telecoms Subscribers (NATCOMS) are together indisposed to the plan, describing it as anti-people, provocative, strange, insensitive and irresponsible.
Furthermore, the suggested new tax regime is a bizarre idea and a unique development as it is being introduced amid 39 disparate taxes payable by the telecom operators in the country. Certainly, this new tax burden would be passed on to subscribers. Globally, excise duty is charged on goods and products. We are thunderstruck and at a loss as to why this is on services. That is not the case with many other countries.
Rather than saddle Nigerians with manifold taxes, the Federal Government should activate other sources to address the current economic challenges, alarming unemployment, plummeting exchange rate and financial hardship on the citizens. The economy is at its lowest ebb as the purchasing power of Nigerians has dwindled in the face of galloping inflation. Basic domestic commodities, power, energy, and transportation are unreachable for the average Nigerian.
If the five per cent duty tax is put into effect, it is conjectured that it could cost several jobs and lead to a crucial contraction in the sector. The ripple effect could be ill-fated to Nigerians who are burdened with numerous taxations. The government should discontinue the measure, dialogue with stakeholders and find long term solutions to revenue shortfalls in the country, not by frequent resort to desperate quick-fix solutions.
Granted the government needs money, but taxing the telecom sector should not be the only pathway it always seeks to explore. The sector already contributes a lot to the Nigerian economy, and adding more taxes could impact its growth negatively. It will virtually raise tariffs with no direct advantages for either the subscribers or operators. Perhaps, it is time the government began to contemplate taxing other sectors of the economy that are not contributing to national development.