Multiple taxes will harm telecoms sector’s growth

Multiple taxes will harm telecoms sector’s growth

Mobile, a subsector of the telecommunications industry, is now the primary gateway to the Internet for consumers in many parts of the world, particularly in developing countries. Despite this, governments in many of these countries are increasingly imposing sector-specific taxes on consumers of mobile services, devices, and mobile operators, in addition to general taxes.

This poses a significant risk to the growth of services among citizens, limiting the widely recognized social and economic benefits of the telecommunications sector.

On this note, stakeholders have described the recently proposed 5% excise duty on telecoms services (calls, SMS, and data) as a policy misfit based on other taxes slapped on the sector, the brunt of which is borne primarily by subscribers.

While the Ministry of Communications and Digital Economy and the Nigerian Communications Commission (NCC) have recognized the importance of policies that support the ICT sector, resulting in digital agendas with ambitious connectivity goals, the Minister of Finance, Budget, and National Planning, Zainab Ahmed, appears to disagree with the need to digitize the economy, stating that more taxes should be imposed on the telecoms sector.

The finance minister, speaking through her Special Adviser on Media, Tanko Abdullahi, cited the Finance Act 2020 as the enabling legislation for the tax on all voice calls, SMS, and data services, in addition to the existing 7.5% VAT paid on goods and services across all sectors of the economy. Adding another 5% would result in subscribers paying up to 12.5% tax on calls, data, and other services.

While there is no doubt that the ministry is constitutionally empowered to collect and disburse government revenue, formulate taxation, tariffs, fiscal management policies, and prepare and manage the annual budget, among other things, the country’s situation appears to have made the minister more desperate.

Justifying her position, Ahmed stated that African countries such as Malawi, Uganda, Tanzania, and others have all tapped into this revenue generation pattern, emphasizing the importance of improving Nigeria’s economic situation.

Stakeholders also believe that the Nigeria National Broadband Plan 2020-2025 (which aims to achieve 70% broadband penetration and 90% population coverage) is in jeopardy. The reasons are self-evident. According to the NNBP, the NCC intends to reduce the cost of data to N390 per gigabyte by 2025; any additional tax on telecom operators implies that the cost of calls, data, and SMS will rise.

With the country’s 5G deployment nearing completion, stakeholders fear that the tax will slow the technology, particularly subscribers’ ability to purchase 5G-enabled devices.

Azeez Amida, Chief Executive Officer of PanAfrican Towers, stated that multiple taxation and fees pose a significant threat to the growth of the Nigerian telecom market.

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