…Over 60m Nigerians may not access internet connectivity
Stories Olabisi Olaleye
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More stakeholders in the Information and Communication Technology (ICT), have kicked against the nine per cent communication service tax bill, waitng for the public reading at the National Assembly (NASS).
This bill, when passed into law, would add to more drain in the dwindling financial strength of most telecoms users in the country and this may lead to stunt broadband growth in the country.
With the bill becoming law, each operators would have no choice than add the nine per cent to services of the end users. Most Nigerians are barely surviving on one dollar per day and with this new introduction, many Subscribers Identity Module (SIMs), may become inactive in the nearest future if this bill is imposed on the Nigerian telecom industry.
Telecoms users will cough out huge sum of money for SMS, MMS, voice calls, data, watsapp and Pay TV, and that could be avoided because they already pay indirectly for VAT for every recharge they do on their mobile phone.
Although, stakeholders believe that taxation is one of the many ways through which governments all over the world generate income to be able to discharge their duties to the citizens. However, they caution the sponsor of the bill and NASS on passing the bill into law.
According to the Minister of Communications, Barrister Adebayo Shittu, the introduction of new taxes without harmonizing existing ones will put pressure on the Nigerian tax system, thereby making it unattractive to investors and may consequently be counter-productive in the long run for the nation’s targets on broadband penetration and end users.
“ Stakeholders in the communications sector need to have a holistic deliberations on the communication services tax as being proposed in the Communication Tax Bill pending before the National Assembly.
“This is necessary in other to weigh the effects of the proposed tax regime on the Government, stakeholders as well as end users of communication services.”
While calling for a juxtaposition of new tax regime with existing ones , the Minister said ,there are several controversies surrounding the proposed bill among stakeholders and they have extrapolated that the Bill seeks to impose additional nine percent charges on users of electronic communication services, which is to be remitted to the Federal Inland Revenue Service (FIRS) on a monthly basis. More so that the extra tax will be applied on voice calls, SMS, MMS, Data and Pay TV viewing.
Shittu posited that over 60 million Nigerians would be unable to afford basic broadband connection, a situation that is likely to threaten Nigeria’s ability to achieve its goal of 30 per cent broadband penetration by 2018 and also undermine the socio-economic progress spurred by increased connectivity. This to a large extent will be a cog in the wheel of implementing the National Broadband plan.
He added that many have also concluded that the proposed Bill will also discourage further investment in the communication industry due to reduced Returns on Investment, and ultimately drastically reduce the sector’s huge contributions to the national GDP. Some have concluded that the proposed CST Bill is an ill wind that would blow the country no good.
“My focus on any tax regime will be to align any process that will stimulate the economy and also ensure that the tax system is efficient by widening the tax net and creating an effective framework for tax compliance to protect the poor and vulnerable in the society who nonetheless have to use telecom services for social inclusion and financial services among others.
He also disclosed federal government intent to enact relevant legislations to boost the Information and Communication Technology (ICT) and telecommunication sector.
On his part,National President, Association of Telecommunications Companies of Nigeria (Atcon),Mr Olusola Teniola disclosed that service Tax bill should be stepped down so as to encourage investors and make the sector more attractive for foreign direct investors.
He said: “Atcon’s considers the proposed Communications Services Tax bill unnecessary and prohibitive because the operators in the sectors are already faced with multiplicity of taxation. Imposition of Communications services tax bill could stifle innovation and creativity in the sector and this would automatically reverse the gains already made in the past decade. This might lead to increase in unemployment, decrease in revenue accruable to government, which would heighten the county’s poverty level.
“Atcon’s position is that whatever we are doing as a nation must not be done to deter investors from staking their hard earned money on the Nigerian telecommunications businesses, in other words, our policies must continue to be investment friendly. It has been established that revenue from voice is still significant and it must be stressed here that the investment that is required to deepen the penetration of Broadband in Nigeria is much greater than the one we used to provide voice telephony. In view of this, the said Communications”.
Olusola noted that the general rule of investment or principle of investment is that institutional Investors will take their investible funds to countries where the tax rate is low or lowest.
Teniola further said that Nigerian telecoms subscribers are already paying tax because VAT is embedded in calls made and data consumed. If the bill sails through it would reduce the subscribers’ consumption of data and reduce length of a voice call, this will result in drop in revenue that would accrue to telecoms operators which will in turn reduce the contribution of the sector to our GDP.
“The Return on Investment (ROI) would be badly affected as a result of the above illustrations. Nigeria as a nation needs a lot of investible funds to build infrastructural facilities and provide employment for her teeming population and especially our growing youth. As we know that Nigeria’ telecom industry still needs circa 50,000 base stations to be able to improve on Quality of Service (QoS) and to reach the unserved and underserved parts of the nation.
He however said that ATCON is working with other relevant agencies to increase the Foreign Direct Investment to the sector, which is highly capital intensive.
“This cannot be achieved if the government is considering introducing Communications Services Tax, which will deter further investments to be made”.
On his part, Chairman Association of Lisences Telecommunication Operators of Nigeria (Alton), Mr. Gbenga Adebayo said the implications are many because currently subscribers pay five percent Value Added Tax on all communication services, including voice call and data subscription.
“Introducing another nine percent in addition to all the other levies and taxes that are being charged the subscribers will amount to a 14 per cent tax on services. This certainly will widen the broadband penetration access and gap. So, if the government is talking on availability of broadband on one side, the tax as it is being proposed is contrary to the affordability policy of government. And we aim for 30 per cent broadband penetration by 2018.
“We believe that the introduction of this tax will not make that a reality, and we are concerned to the extent that it will appear that the bill is insensitive to the challenges facing the subscribers. Affordability is a major issue. When some people run bills of several thousands of naira every month, there are a large number of subscribers who run only in several tens or hundreds of naira in a month. When you compare the average minimum wage, the per capital income of the people against the implications of introduction of this new tax, we feel that it will affect access to communication services and quite significantly too”.
Adebayo explained that there is no value to the 150 million subscribers in the country but mere revenue objective of the government , which is contrary to the effort that is being made by the same government for broadband penetration.
“Today, as you are aware, telecommunications is an infrastructure of infrastructures. On our platform, a number of other services ride on it because once you have access to the Internet; it is as if you have a highway to the world to do a lot of things – e-banking, e-commerce, e-government, e-medical, and all that. When you deny people access to this gateway, you are certainly taking away their rights. In some jurisdictions now, the internet is considered as the first right of citizenship. Therefore, if we are where we are, aiming for only 30 per cent penetration in broadband by 2018 with the efforts that the industry and the government are making, introduction of this tax at this time will just make the people unable to afford the services.
“Moreover, we think that more than the implication of the nine per cent, it will have a spiral effect on the entire industry. Other than subscribers paying five per cent for VAT, they are now going to be confronted with this nine per cent,” Adebayo said.
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