" ITREALMS: No to proposed excise duty on telecommunications services - ITREALMS

Friday, August 12, 2022

No to proposed excise duty on telecommunications services - ITREALMS

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Nigeria is Africa's largest ICT market, accounting for 82 per cent of the continent's telecom subscribers and 29 per cent of internet usage. This is according to Wikipedia. It goes on to say that globally, Nigeria ranks 11th in the absolute number of internet users and 7th in the absolute number of mobile phones.

The National Bureau of Statistics (NBS), has equally established that the telecommunications sector is the largest segment of the Information and Communications Technology (ICT) sector. Today, Nigeria has one of the largest telecoms markets in Africa, contributing over 17 per cent to the country’s Gross Domestic Product (GDP).

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

The impact spreads across every segment of the economy and the lives of Nigerians from all walks of life. It makes other sectors more productive, profitable and proficient. With telecommunications services, Nigerians have improved access to financial services, e-learning is on the rise, and e-Healthcare is a reality.

The sector has had to contend with a myriad of challenges from the get-go. Multiple taxations and over-regulations top the list of challenges, with lack of power, vandalism, theft, and Right of Way imbroglio, following close behind. And because the sector depends largely on imports for its input, the difficulty in accessing foreign exchange remains a big issue.

The industry continues to thrive to maintain its operations despite these challenges and the directive from the NCC not to increase tariffs even when everything else continues to rise.

Now it appears that the government is set to throw another spanner in the works with its proposed excise duties on telecommunication services. It is due to begin implementation of the new tax from the next fiscal year.

The Minister of Finance and Budget, Zainab Shamsuna Ahmed, noted that the proposed tax is a bid to boost the country's dwindling revenue against piling expenditure by the government, which has resulted in huge deficit spending finance by borrowing In explaining the tax which is under the purview of the Nigeria Customs Service, the government said the NCS would introduce frameworks for recovering duties, taxes, and appropriate fees from transactions conducted over electronic networks.

Naturally, telecom services users, operators and associations have kicked against the proposed tax. The government however appears to have bought the idea from the Finance Ministry hook, line and sinker with the focus on how excise revenue is expected to grow exponentially because of the introduction of the telecom service charge.

News reports indicate that there is some dissension; the Minister of Communications and Digital Economy, Isa Pantami, is said to be opposed to the tax.

Speaking during the maiden edition of the Nigerian Telecommunications Indigenous Content Expo organised by the Nigeria Office for Developing the Indigenous Telecom Sector, Pantami was quoted to have said, “The Ministry of Communications and Digital Economy is not satisfied with any effort to introduce excise duty on telecommunication services.

“Beyond making our position known, we will go behind the scenes and go against any policy that will destroy the digital economy sector. We will go to any extent to legitimately and legally defend its interest.”

Nobody appears to be ready to listen to him, however. The government claims it is broke, and with shrinking borrowing channels, it must look elsewhere for funds.

While the Budget Office maintains that “Revenue generation remains the major fiscal challenge of the Federal Government," experts insist that the government’s plight is more a failure of expenditure than a generation.

Granted the government needs money, but taxing the telecom sector shouldn't be the only avenue it always seeks to explore.

The telecom sector already contributes a lot to the Nigerian economy, and adding more taxes could impact its growth negatively. It will effectively raise tariffs with no direct benefits for either the subscribers or operators.

Maybe, it is time the government begins to, as Pantami suggests, consider taxing other sectors of the economy that are not contributing to national development

This new tax increases the tax on telecom services by five per cent excise duty and brings the total taxation to 12.5 per cent. This is unwelcome, unappreciated and unacceptable. It is tantamount to killing the goose that lays the golden egg.

We all likely know this tale by Aesop but it bears repeating: "There was once a Countryman who possessed the most wonderful Goose you can imagine, for every day when he visited the nest, the Goose had laid a beautiful, glittering, golden egg.

The Countryman took the eggs to market and soon began to get rich. But it was not long before he grew impatient with the Goose because she gave him only a single golden egg a day. He was not getting rich fast enough.

Then one day, after he had finished counting his money, the idea came to him that he could get all the golden eggs at once by killing the Goose and cutting it open. But when the deed was done, not a single golden egg did he find, and his precious Goose was dead."

What's the lesson from the tale? In the quest for more, ensure you do not lose all you already have.

This is the lesson that the government now need to heed. With the sort of ideas coming out from the government it is now indisputable, our government needs fresh blood and even fresher ideas.

The proposed tax will affect the usage of telecom services, limit broadband adoption and slow down socioeconomic activities. Residents in underserved areas will naturally be disproportionately impacted. The tax will do far more harm than good.

The proposed exercise duty of telecom services is an ill wind that will do no good.

*Contributed by Elvis Eromosele, a Corporate Communication professional and public affairs analyst lives in Lagos.

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