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Wednesday, July 26, 2017

Burden of additional tax on telecom services

 Features@ITRealms:
With the worsening hardship of the current economy, it is bewildering that National Assembly in their imagination should be thinking of a bill of up to 9 per cent tax strictly on electronic communications services, writes Remmy Nweke.

Preamble:
Ms Ifeoma Afam is a school leaver who in search of better life, joined the elder relatives in an Onitsha suburb called Awada; because according to her, the access to telecommunications services have not been very fantastic in her village and she needed to be on top of her future and usage of Information and Communication Technologies (ICT) was first to be optmised.

No sooner than Ifeoma arrived Onitsha in Anambra State, when she heard in the news that a bill was before the National Assembly in the name of Telecommunication Services Tax Bills, 2016 and also referred to as ‘Electronic Communication Service Tax (eCST)’ in both Chambers of the National Assembly.

Double barrel taxation at National Assembly:
Whereas the Senate version of the bill canvassed for nine (9) per cent on Electronic Communication Service Tax, the version originating from the House of Representatives was asking for seven (7) per cent.

For instance, the bill for Act to provide for the instituting Telecommunications Services Tax and Related Matters 2016 sponsored by Hon. Saheed Akinade-Fijabi, representing the Ibadan North West/South West Constituency of Oyo State at the House of Representatives, sought to establish a tax regime to be known as the Communication Service Tax (CST) to be imposed, charged, payable and collected on a monthly basis which shall be assessed, collected and administered in accordance with the provision of the Bill and levied on charges payable by a user of an electronic communication service other than private Electronic Communication Services as may be supplied by Service Providers.

Fijabi, in what has become the mistake of the elites in some quarters, argued that CST will be for any form of recharges to be considered as a charge for usage of Electronic Communication Service, then Fijabi went specific, thus the tax shall be levied on (a) voice calls, (b) SMS – Short Messaging Service, (c) MMS – Multimedia Messaging Service, (d) data usage both from Telecommunication Services Providers and Internet Service Providers; (e) Pay per View TV Stations, etc.

A section of the bill states inter alia “The tax shall be paid together with the Electronic Communication Service charge payable to the service provider by the user of the service. (2) The tax is due and payable on any supply of Electronic Communication Service within the time period specified under subsection (5) of section 6 whether or not the person making the supply is permitted or authorized to be under the Bill provide Electronic Communication Services.

The tax rate, Hon. Fijabi suggested will be 7 per cent of the charge for the use of the communication service.  While the Federal Inland Revenue Service (FIRS) established under Section 1 of the Federal Inland Revenue Service (Establishment) Act, 2007 shall be responsible for collection and remittance of tax to the Federation Account.

He also said, the Federal Government would be responsible for the administration and management of the funds accruing from the tax. The FIRS shall therefore collect the tax and any interest and penalty paid under this Bill.

Condemnation in entirety:
But taking a knock on the bill, the Executive Director, Operations, DigitalSENSE Africa Media, Mrs. Nkemdilim Nweke in her opening remarks at the 2016 Nigeria DigitalSENSE Forum series on Internet Governance for Development (IG4D) and Nigeria IPv6 Roundtable in Lagos, condemned the bill in its entirety, saying that the motion before the National Assembly for a 7% tax on all electronic services will further impoverish the teeming unemployed Nigerian youths, thereby, making it more difficult for people to access and share knowledge which the electronic communication is made to abridge.

Mrs. Nweke who is also the president, Domain Name System (DNS) Women Foundation in Nigeria, said, Nigerians and especially women, are already paying for all the mismanagement of her leaders “why make them pay more especially in the present economic downturn?”

Additional condemnation came from the Global System for Mobile Association (GSMA)-lead joint petition with the Association of Licensed Telecom Operators of Nigeria (ALTON), the Association of Telecoms Companies of Nigeria (ATCON) and National Association of Telecoms Subscribers (NATCOMS) rejecting the bill in all it represents.

GSMA standing in for industry association for mobile operators worldwide; ALTON is for mobile operators of Nigeria; ATCON is for other associated telecom companies, and NATCOMS represents telecom consumers; in unison expressed dismay regarding this bill.

A petition strongly worded and addressed to the Nigerian Finance Minister, Mrs Kemi Adeosun and her counterpart in Communications, Barr. Adebayo Shittu, the four telecommunications interest groups jointly rebuffed the proposed plan by the government to tax electronic communication services in the country.

A copy of the petition obtained by ITRealms, revealed that Mortimer Hope, Director Africa of GSMA, Engr. Gbenga Adebayo, chairman of ALTON, the immediate-past president of ATCON, Engr. Lanre Ajayi and Chief Adeolu Ogunbanjo, the national president of NATCOMS signed for their respective organisations.

The petitioners equally copied the Executive Vice Chairman, Nigerian Communications Commission (NCC), Prof. Umar Garba Danbatta, Senate President, Dr. Olubukola Saraki and the Speaker, House of Representatives, Hon. Dogara Yakubu among others, insisted that if this tax proposal is accomplished, it will not only increase prices for consumers, but stifles further investment in a market already battling multiple taxation.

“If introduced, such tax will result in an increase in prices for consumers, have adverse impacts on the adoption of mobile services and industry investment, and be counter-productive to the longer term national digital strategy objectives set by the Government of Nigeria,” the groups said.

They also said, the bill tends to increase affordability barriers to the uptake of mobile services in the country, citing for instance, a recent World Bank report which showed a 10 per cent increase in mobile broadband penetration in low to middle income countries leading to a 1.38 per cent rise on Gross Domestic Product (GDP) growth.

Mobile access for 83m Nigerians:
Pointing out that as at March 31st 2016, Nigeria has 83 million people with access to mobile services, they lamented that over half of the population are still without a mobile connection, while affordability remains a key challenge to connect the unconnected, who are typically lower income population groups.

They posited that further taxation on electronic communication services will hit lower income consumers the most, who are already struggling due to the adverse economic situation and increased price pressure and for whom affordable access to information and communication technology is critical to their social and economic inclusion, stressing that this will result in a double taxation for consumers who already paid Value Added Taxes (VAT) on telecommunications services.

They argued that the proposal would increase the administrative cost burden on service providers to comply with numerous and complex tax regulations, already high compared to other countries of the world.

The petitioners, requested both ministers to urgently intervene to prevent the adoption of a new tax on electronic communications services to ensure that digital economy delivers its full potential in Nigeria and for Nigerians.

Ndukwe cautions on 9% telecom service tax:
The National Coordinator, Alliance for Affordable Internet (A4AI)-Nigeria Coalition, Dr. Ernest Ndukwe, has warned that an estimated 50 million Nigerians may be denied access to affordable basic broadband connectivity if the proposed Communication Service Tax (CST) Bill 2015 otherwise known as electronic services (eServices) tax of 9 per cent, before the National Assembly.

Dr. Ndukwe, who was a former Executive Vice Chairman (EVC), Nigerian Communications Commission (NCC), posited that the bill if passed will widen the digital divide and slow down the level of investment in the telecommunications sector and affiliate industries.

According to him, the Communication Services Tax portends more danger than good for the Nigerian telecommunications consumers, beginning with denying of access to the populace, particularly access to information through the internet.

Taxing telecom consumers, he said, would definitely put rise to the cost of connection to the internet thereby denying the defenseless groups especially women, access to internet.

“Balanced fiscal policy must consider affordability of broadband and ICT, and should not put into place additional barriers that would make internet access unaffordable for hundreds of millions of Nigerians. Nigeria is far behind the more developed countries of the world when it comes to broadband use, and the introduction of the CST will only widen this gap. The National Assembly must reconsider the passage of the CST and its impact on the development of broadband in Nigeria. After such a review, if the introduction of a CST is deemed an absolute necessity, it must consider a lower tax rate than nine per cent: one that would enable it to achieve fiscal revenue targets without undermining broadband affordability and access,” Ndukwe advised.

Conclusion:
ITRealms recollects that before now analysis has shown at least, the proposed seven per cent tax to be levied on consumers of communications services would result in an additional 10 per cent of the population — equivalent to nearly 20 million Nigerians, being unable to afford a basic broadband access.

This analysis also suggested that the passage of such a tax is likely to threaten Nigeria’s ability to achieve its goal of 30 per cent broadband penetration by 2018 and undermines the socio-economic progress spurred by increased connectivity.

But as Nigerians await the outcome of the bill, which ordinarily should be ‘dead on arrival’ on the floor of the National Assembly, this will tell if truly members of both chambers are representatives of the people, thereby making the dreams of the likes of Ifeoma to have adequate access to her future unsustainable, if not unachievable while the tax widens the digital between her and rest of the world.

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