Telecommunications

No to the proposed excise duty on telecommunications services

Nigeria is Africa’s largest ICT market, accounting for 82% of the continent’s telecom subscribers and 29% of internet usage.

It’s according to Wikipedia. He goes on to say that globally, Nigeria ranks 11th in absolute number of internet users and 7th in absolute number of mobile phones.

The National Bureau of Statistics (NBS) has also established that the telecommunications sector is the largest segment of the information and communications technology (ICT) sector. Today, Nigeria has one of the largest telecommunications markets in Africa, contributing over 17% to the country’s Gross Domestic Product (GDP).

Telecom mast

In just over two decades, the telecommunications industry has seen over $75 billion in investment and 250 million lines connected. That’s up from NITEL’s 400,000 pre-GSM auction.

The impact extends to all segments of the economy and the lives of Nigerians from all walks of life. It makes other sectors more productive, profitable and competent. Thanks to telecommunications services, Nigerians have better access to financial services, e-learning is on the rise and e-health care is a reality.

The sector faced a myriad of challenges right from the start. Multiple taxation and over-regulation top the list of challenges, followed closely by lack of electricity, vandalism, theft and right-of-way imbroglio. And because the sector is largely dependent on imports for its inputs, difficulty in accessing foreign exchange remains a big problem.

The industry continues to thrive to maintain operations despite these challenges and the NCC’s directive not to increase rates even when everything else continues to increase.

Now it looks like the government is set to throw another spanner in the works with its proposed excise duty on telecommunications services. It should start implementing the new tax from next fiscal year.

Finance and Budget Minister Zainab Shamsuna Ahmed noted that the proposed tax is an attempt to raise the country’s dwindling revenue against the government’s accumulation of spending, which has led to a huge financial shortfall by borrowing. Explaining the tax which falls under the Nigeria Customs Service, the government said that the NCS will introduce frameworks for the collection of appropriate duties, taxes and fees on transactions conducted over electronic networks.

Naturally, users of telecom services, operators and associations have come out against the proposed tax.

The government however seems to have bought the idea of ​​hook, line and sinker from the Ministry of Finance emphasizing how excise revenue is expected to grow exponentially due to the introduction of excise charges. telecommunication service.

News reports indicate that there are divisions; Communications and Digital Economy Minister Isa Pantami is reportedly opposed to the tax.

Speaking at the first edition of the Nigerian Telecom Indigenous Content Exhibition organized by the Nigerian Bureau for the Development of the Indigenous Telecommunications Sector, Pantami was quoted as saying: “The Ministry of Communications and Digital Economy does not is satisfied with any effort to introduce excise duties on telecommunications services.

“Beyond making our position known, we will go behind the scenes and oppose any policy that destroys the digital economy sector. We will do everything to legitimately and legally defend its interests.

However, no one seems ready to listen to him. The government claims it is broke, and with borrowing channels shrinking, it must look elsewhere for funds.

While the Budget Office maintains that “revenue generation remains the federal government’s top fiscal challenge,” experts insist that the government’s predicament is more of a spending failure than a generation one.

Yes, the government needs the money, but taxing the telecom sector shouldn’t be the only avenue it’s still trying to explore.

The telecommunications sector already contributes a lot to the Nigerian economy, and the addition of new taxes could have a negative impact on its growth. It will effectively increase tariffs without direct benefits to subscribers or operators.

It may be time for the government to start, as Pantami suggests, to consider taxing other sectors of the economy that do not contribute to national development.

This new tax increases the tax on telecommunications services by 5% excise duty and brings the total tax to 12.5%. It is unwelcome, misunderstood and unacceptable. It’s like killing the goose that lays the golden egg.

We all probably know this tale from Aesop, but it bears repeating: “Once upon a time there was a countryman who owned the most wonderful goose you could imagine, for every day when he visited the nest the goose had laid a beautiful shimmering golden egg.

The compatriot took the eggs to the market and quickly began to get rich. But he soon grew impatient with the Goose as she only gave him one golden egg a day. He wasn’t getting rich fast enough.

Then one day, after he finished counting his money, the idea occurred to him that he could get all the golden eggs at once by killing the Goose and opening it. But when the deed was done, he didn’t find a single golden egg and his precious goose was dead.

What is the lesson of the tale? In the quest for more, make sure you don’t lose everything you already have.

This is the lesson the government must now heed. With the kind of ideas coming out of government, it is now indisputable, our government needs fresh blood and even fresher ideas.

The proposed tax will affect the use of telecommunications services, limit the adoption of broadband and slow down socio-economic activities. Residents of underserved areas will naturally be disproportionately affected. The tax will do far more harm than good.

The proposed excise duty on telecommunications services is an ill wind that will not help.