The move by the Federal Government to introduce a five per cent excise duty on telecommunication services on calls and data is unacceptable and should be stepped down. Apart from increasing the economic hardship of Nigerians, its timing is wrong. It is coming at a time the naira has lost its value and the cost of food items has risen astronomically. Any move to further impoverish Nigerians through the proposed telecom tax will engender far-reaching consequences.
Excise duty is often implemented to discourage the consumption of certain commodities like alcohol and tobacco. Increasing tax on telecom services, such as call and data, in a digitalized world, will impede social interaction as well as the provision of goods and services. It will adversely affect learning, as most schools now conduct some of their lessons through online channels. The excise duty, which covers both pre-paid and post-paid services, will limit people’s access to information and participation in governance.
Although the government will make N165 billion annually from the tax regime, it will impoverish millions of Nigerians and make nonsense of the government’s promise to lift 100 million Nigerians out of poverty. The Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, unveiled the plan at a recent stakeholders’ forum on the implementation of excise duty on telecoms services, organsied by the Nigerian Communication Commissions (NCC). According to the minister, the planned five per cent excise duty is part of the provisions in the Finance Act 2022 signed by President Muhammadu Buhari last year.
The new tax was initially slated to take effect in June, 2021 but was later deferred due to disagreement between the government and other stakeholders in the sector. With the five per cent tax and the existing 7.5 per cent Value Added Tax (VAT), subscribers of telecom services will pay a total of 12.5 per cent tax on telecom services if the new tax regime is not discarded. While the government has justified the initiative as part of its efforts to shift attention to non-oil sector as a vital revenue source, it will hurt the economy the more. Data from the NCC showed that Nigerians and other nationals residing in the country spent N3.25 trillion on airtime, data and other telecommunication services last year.
This year’s spending on telecom services is projected to exceed that of 2021. For instance, in 2021, 173.56 billion minutes of calls were made in the country, indicating a 15.07 per cent increase from the 150.83 billion minutes of calls made in 2020. Also, the number of short messages (SMS) sent by subscribers increased by 15.06 per cent from 8.22 billion in 2020 to 9.46 billion in 2021. Expectedly, many Nigerians have kicked against the new tax regime, which they consider inexpedient at this point in time. To them, the move is insensitive. Surprisingly, the Minister of Communications and Digital Economy, Isa Pantami, has rejected the plan. He said the plan would negatively impact the sector and Nigerians. Having observed the immense contribution of the telecom industry to the economy, the minister urged the government to rescind the decision. In the same vein, the Association of Licensed Telecom Operators of Nigeria (ALTON) has also opposed the planned tax.
According to the telecoms operators, the exercise will add to the 39 different taxes imposed on Nigerians in recent years. Early in the year, the Federal Government announced a new tax on consumption of non-alcoholic, carbonated and sweetened beverages. It said the move was one of its 2022 budget priorities and part of the provisions of the new 2021 Finance Bill, and part of government’s efforts to generate more revenues.
Under the plan, government imposed N10/litre tax. The government claimed that the revenue raised would be spent on health-related and critical expenditures, with the objective to discourage excessive consumption of sugar in beverages. According to government’s projections, it intends to raise over N200billion from the policy between this year and 2025, while the Nigeria Customs Service (NCS) will make about N127billion as excise duty on carbonated drinks.
If the five per cent excise duty on calls and data is implemented, it is estimated that it could result in the loss of over 100,000 direct and indirect jobs. Experts also estimate that the move could lead to a significant contraction in the sector. The ripple effect could be devastating to ordinary citizens already impoverished by multiple taxation. The government should find long-term solutions to revenue shortages rather than the frequent resort to desperate, quick-fix measures to generate funds for critical public expenditures. Our tax system should have a human face.
We, therefore, urge the government to halt the move and engage the telecom operators to resolve the problem. Imposing another five per cent tax on telecoms services will cripple the purchasing power of many Nigerians.