Customers will pay extra for calls as a result of the federal government’s proposal to reinstate an excise tax on telecommunications services.
The government is raising the value-added tax on telecom services from the current 7.5 percent to 12.5 percent. This action is a component of a larger tax reform program that is described in the bill “A Bill for an Act to Repeal Certain Acts on Taxation and Consolidate the Legal Frameworks relating to Taxation and Enact the Nigeria Tax Act to Provide for Taxation of Income, Transactions, and Instruments, and Related Matters.”
The goal of the proposed measure is to harmonise the nation’s taxes laws. It aims to impose excise taxes on gaming, gambling, lotteries, betting services, and telecoms.
The bill said that “services, including telecommunications, gaming, gambling, betting, and lotteries however described, provided in Nigeria shall be charged with duties of excise at the rates specified under the Tenth Schedule to this Act in a manner as may be prescribed by the Service.”
“Amount of an excisable transaction is the amount chargeable for the service by the service provider, both in money or money’s worth,” the bill clarified.
Industry participants claim that the fee will hinder telecom companies in addition to harming consumers.
Adeolu Ogunbanjo, president of the National Association of Telecoms Subscribers, stated that the levy will negatively impact both the telecom sector and subscribers. “By adding more burdens to the industry, they are effectively attempting to kill it.”
Even though a 2023 presidential order halted the application of a five percent excise levy on cellular services, the excise fee has been reinstated. Since it was first suggested in 2022, this tax has generated controversy because telecom companies have stated they would pass the expense on to customers.
Telcos contend that their taxes are already excessive. The worldwide telecom industry association, GSMA, claims that Nigeria’s telecom sector pays more than 50 different taxes to different branches of the government.
At the time, the Ministry of Finance, Budget, and National Planning, led by Zainab Ahmed, stated, “The duty rate was not captured in the Act because it is the President’s responsibility to fix excise duty rates, and he has fixed five percent for telecommunication services, which include GSM. It is common knowledge that our revenue cannot cover our financial responsibilities, thus we must turn our focus to non-oil revenue.”
The chairman of the Association of Licensed Telecoms Operators of Nigeria, Gbenga Adebayo, recently pleaded with Communications, Innovation, and Digital Economy Minister Bosun Tijani to assist in the removal of excise taxes on telecom services.
He stated, “Collaborate with the Presidential Committee on Fiscal Policy and Tax Reforms to definitively address the perennial incidence of multiple taxation in the Nigerian telecommunications sector, including the elimination of the currently suspended excise duty on telecommunications services.”
The Nigeria Communications Commission’s immediate former executive vice chairman, Umar Danbatta, said that while excise duty is applied to luxury goods, telecommunications services ought to be free from it. that telecommunications services are not a luxury, according to the definition.
They are necessary, you know. As you are aware, they are now heavily focused on our personal life. Additionally, they impact about 220 million Nigerians.
Following the government’s decision to reinstate the tax, the National Association of Telecoms Subscribers, which had earlier filed a lawsuit to contest the five percent excise duty prior to its suspension in 2023, intends to reopen the case.
“We intend to bring the case back to the courtroom,” Ogunbanjo affirmed. “When they first announced the five percent excise duty, we went to court, but we chose to suspend the lawsuit because it had not yet been applied. Now that the administration has moved forward, we are returning to court.”
