Telecommunication service users in Nigeria may soon be required to pay nine per cent tax on specified telecoms services if a draft bill now before the National Assembly is passed into law. The bill, known as the Communication Service Tax Bill 2015, which has reportedly passed its first reading at the Senate, seeks to introduce a tax of nine per cent on electronic communication service fees charged by service providers. These include charges on voice calls, short message service (SMS), multimedia messaging service (MMS), data usage from other telecoms service providers, internet service and pay television stations.
It also provides that communication service providers will be required to charge Communication Service Tax (CST) on the specified services and remit it to the Federal Inland Revenue (FIRS). Penalties for non-compliance include N50,000 for failure to file returns on the due date and N10,000 for each day the tax is not submitted. In addition, failure to pay tax by due date attracts monthly interest of 150 per cent of the average of the commercial banks’ lending rate. And, refusal of service providers to provide government access to the network nodes attracts a penalty of five per cent of the annual gross revenue of the last audited financial statements.
Since its introduction, the bill has elicited sundry reactions from consumers and other major stakeholders in the nation’s communication sector. Many stakeholders in the Information and Communication Technology (ICT) sector have reportedly kicked against the tax bill.
We are strongly opposed to the Communication Tax Bill, considering that its passage will further impoverish telecoms service users in the country, especially the poor and the vulnerable. It will also limit the capacity of Nigerians to make use of telecoms services and drastically reduce broadband penetration in the country. As at March this year, over 300 million Africans, including Nigerians, had no broadband connection.
With the law in place, about 60 million Nigerians will have to pay more for internet connectivity. Some people may be forced to drop their phones in view of the rising costs of telecoms services. Since the new bill is not harmonised with existing tax laws, it is bound to increase the people’s tax burden.
Already, Nigerians are grappling with multiple taxation. With the five per cent Value Added Tax (VAT) on all goods and services, consumers in the country will end up paying 14 per cent tax on communication services alone. Government should find other ways of raising funds. It should not be done at the expense of the people.
Besides, the proposed Communication Tax Bill contradicts the federal government’s goal of providing cost effective, ubiquitous ICT access for overall national development. The proposed tax will also likely slow down the flow of Foreign Direct Investments (FDIs) into the country.
Available data from the National Bureau of Statistics (NBS) indicate that telecoms overtook the oil and gas sector as the highest recipient of foreign investments in 2015, while telecoms’ contribution to Gross Domestic Product (GDP) rose from 8.34 per cent in 2014 to 9.01 per cent in 2015. The data further revealed that over $6 billion in FDI flowed into the telecoms sector between 2011 and 2016.
As at last year, subscription to GSM networks in the country amounted to 148,703,160. According to the Nigerian Communications Commission (NCC), telephone users in the country spent N107 billion on calls in 2012. The agency also revealed that Nigerians spent N279.8 billion on calls and Short Message Services (SMS) in the first quarter of 2013.
All these gains of the spread of telecoms services in the country will be reversed if the Communication Tax Bill is enacted into law. In view of the numerous disadvantages of the bill, we urge the National Assembly members to throw it out when next it comes up for deliberation. Apart from halting our progressive march to ICT development, it will reverse the progress made so far in government initiatives such as e-Agriculture, e-Finance, e-Health and e-Education.
Since we are in an ICT-driven world, we cannot afford to limit our citizens’ access to it through a debilitating communication tax bill. The proposed tax bill should be rejected. It is anti-people and anti-development. Above all, it will have a negative domino effect on the telecoms industry.
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