...expert faults FG policies inconsistencies
The Federal Government of Nigeria is set to implement the 5% excise duty tax on mobile telephones, fixed telephones, and Internet services it previously removed earlier in the year.
The additional tax on telecom services is part of new Fiscal Policy Measures (FPM) for 2023, announced via a circular dated 20 April 2023 signed by the Minister of Finance, Budget, and National Planning, Mrs Zainab Ahmed.
Prof. Isa Ali Pantami at that time stated that it was part of the government’s commitment to reviewing the amount of taxes that operators in the telecom business are subject to. But now, the FG is reneging on that to uphold the country’s 5% excise duty for telecom operators.
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The 5% telecoms excise duty and matters arising
At the time, telecom companies insisted that regular Nigerians would bear the extra cost, stating that telecom consumers would pay the tax, as they would increase the consumption tax on telecom services to 12.5 per cent.
To counter this, telecommunication consumers under the aegis of the National Association of Telecoms Subscribers sued the Federal Government in court.
The government later suspended the implementation of the tax and set up a committee to review it. Prof Pantami announced the suspension during the inaugural meeting of the Presidential Committee on Excise Duty for the Digital Economy Sector.
According to the minister, the Information, Technology and Communication sector, especially the telecom industry, is already overburdened by excessive and multiple taxations, which will likely adversely affect the sector if the government fails to take any precautions.
Following months of uncertainty regarding implementing the new tax on calls, data, and other telecom services, Pantami declared in March 2023 that the government had decided to exempt telecoms from excise duty because it cared about the suffering of Nigerians.
Pantami, the Chairman of the Committee, specifically set up to review the proposed excise duty, said the Committee had carried out its national assignment and accordingly submitted its report to the President, justifying why the sector should be exempted.
Telco operators already pay a lot of taxes
Following the committee’s review of the excise duty, Prof Pantami explained that the operators in the Nigerian telecommunication sector already pay a lot in taxes, charges, and levies.
It is worthy noting that telecoms have continued to be a major contributor to the Nigerian economy regarding Gross Domestic Product Contribution (GDP).
Naira scarcity and recovering economy
The first few weeks of 2023 were characterised by the economic strain brought upon by the Naira scarcity due to the CBN’s redesign policy. Many Nigerians felt the brunt of the cash crunch and are only just recovering from that and other policies implemented by the CBN -including the 18% interest rate.
Read also: Why CBN’s new 18% interest rate could spell doom for Nigerian businesses
As many Nigerians have turned to cashless transactions, there is an increased need for telecommunication and internet services. Making Nigerians pay more for these services would not be welcomed with open hands.
In March, Prof Pantami explained that the desire to ease the sufferings of Nigerians was part of why President Buhari suspended the excise duty at the time.
What the latest circular says
In the circular, the Minister confirmed the implementation of the excise duty on telecommunication services earlier introduced via the Finance Act 2020 and prescribed in the Official Gazette No. 88, Vol. 109 of 11 May 2022, approved by the President.
The policy further introduces additional excise taxes ranging from 20% to 100% increases on previously approved rates for alcoholic beverages, tobacco, wines, and spirits, effective 1 June 2023.
It read in part, “The revised excise duty rate on alcoholic beverages and tobacco products in line with existing excise regime implementation period shall take effect from 1st June 2023 and reviewed upwards in line with the new regime by 1st June 2024.
“The excise duty on Single Use Plastics shall also take effect from 1st June 2023. While on the other hand, the excise duty rate on Telecommunication Services remains as approved by Mr President and published in the Official Gazette No. 88, Vol. 109 of 11th May 2022.”
“The tax is applicable on mobile telephone services, fixed telephone, and internet services, both postpaid and prepaid at the rate of five per cent.”