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The Nigerian government is expected to make over N200 billion annually as the new five per cent telecommunications tax goes into effect. Telecommunications subscribers are to pay five per cent tax on calls, SMS and data services in addition to the existing 7.5 per cent Value Added Tax (VAT) on telecommunications services meaning that subscribers get to pay 12.5% as tax on all telecom services.
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Some experts believe the tax revenue could be higher in a market with more than 200 million telecom subscribers.
Minister of Finance Budget and National Planning, Zainab Ahmed, weeks back, told stakeholders on implementation of excise duty on telecommunications services that government needs to tax non-oil sectors to remain solvent.
Her words: “Payments are to be made on monthly basis, on or before 21st of every month. The duty rate was not captured in the Act because it is the responsibility of the president to fix rate on excise duties and he has fixed five per cent for telecommunication services which include GSM. It is public knowledge that our revenue cannot run our financial obligations, so we are to shift our attention to non-oil revenue. The responsibility of generating revenue to run government lies with us all.”
But telecom operators are warning that additional tax could undermine mid to long term growth and counter all short term revenue expectations by government.
Telcos recently proposed a 40% hike in the cost of calls, SMS, and data blaming unfavourable operating environment. But the Nigerian Communications Commission (NCC) arguing that further price hike could stunt consumers’ spending for existing and envisaged services.
Tax will burn out sector
Subscribers spent about N2 trillon on calls and data in the first six months of 2020 acccorrding reports. In 2021, it was N1.77 trillion. Available data for Q1 and Q2, 2022 shows that subscribers have spent over N1,25 trillion on telephony services.
A worried Association of Licensed Telecoms Operators of Nigeria (ALTON) has warned that while subscribers will bear the brunt of the tax, it is the sector that will ultimately get burnt out.
In a similar vein, Association of Telecommunications Companies of Nigeria (ATCON) is warning that government may be scaring off consumers from leveraging telecom services. Higher taxes could mean lesser patronage and stifling of real growth, said ATCON’s president, Ikechukwu Nnamani in Lagos to IT Edge News.
The telecoms regulator plans to have further “all stakeholders’ meeting to smoothen the rough edges, over the matter,” a senior official of the commission told IT Edge News in Abuja.
According to the World Bank, Nigeria is among countries with poor tax regime creating a wide financing gap for achieving national development. Appropriate tax policies and systems are most needed to help raise revenues, particularly in the face of dwindling income from oil export by countries like Nigeria.
