The federal government has suspended the implementation of the proposed five percent telecommunications tax service that was recently announced by the Ministry of Finance to start in 2023.
The suspension was made known by the Minister of Communications and Digital Economy, Isa Pantami during the inaugural meeting of the Presidential Committee on Excise Duty for the Digital Economy Sector, in Abuja on Monday.
Recall, the minister had publicly criticised and had said the telecoms sector is already overburdened by multiple taxations.
Pantami said the suspension of the policy that was directed by President Muhammadu Buhari, followed his petition as the Chairman of the Presidential Council on Digital Economy and eGovernment. According to him, the five percent levy has the potential to impact negatively on the digital economy sector, particularly, telecommunications, which is already overburdened with a plethora of taxes totaling about 41 categories.
He explained that some levels of government were imposing the same levies that mobile network operators (MNOs) had already paid to the federal government.
In a recent report, the Federal Ministry of Finance, Budget, and National Planning had last month, notified the telecom sector of the intention of the government to introduce a five percent excise duty on telecom operation, in addition to the 7.5 percent Value Added Tax (VAT) that all sectors of the economy pay for goods and services rendered.
However, Pantami, the Nigerian Communications Commission (NCC), telecom operators, and subscribers rejected the plan and described it as multiple taxes.
Pantami had faulted the timing and process and had insisted that part of the responsibility of a responsive government was not to increase the problems of the citizens. He said “If you look at it carefully the sector contributes two percent excise duty, 7.5 percent VAT to the economy and you want to add more to create additional hardship. This cannot be tolerated at this time and it will be resisted.”
Pantami noted that prices of products and services in other sectors have increased significantly but the prices of products and services in the telecom sector have not increased significantly in the last three years.
The minister stated that whenever the regulator, NCC brought the matter to him, he had always encouraged and urged them to try and persevere with the little profit they are making as the current economic situation in Nigeria does not give room to continue adding burden on the poor citizens.
While inaugurating the committee yesterday, Pantami listed the contributions of the telecom sector to the country’s Gross Domestic Product (GDP) and gave reasons why the sector should be encouraged to do more.
Other members of the committee included the Executive Vice Chairman and Chief Executive Officer, NCC, Prof. Umar Danbatta; the Executive Chairman of Federal Inland Revenue Service (FIRS), Mr. Muhammad Nami; and the representatives of Mobile Network Operators (MNOs).
Pantami recalled several positive developments in the sector that needs to be sustained through the support of the government.
“Three unprecedented positive developments have occurred in the digital economy sector in the last three years. In the last quarter of 2020, ICT alone, without including digital services, contributed 14.70 percent to the GDP.
“In the second quarter of 2021, we saw another record where the sector contributed 17.90 percent to the GDP. The last record was in the second quarter of 2022 where ICT contributed 18.44 percent to GDP. By implication, this sector has been contributing a lot to the economy,” Pantami said.
Giving his comment on the suspension, Chairman ALTON, Engr. Gbenga Adebayo said it was a victory for the subscribers who would have borne the brunt of the tax.
He said: “The news of the suspension is well received. It shows that the government is listening to the complaints of the people and is always ready to do everything to increase penetration.
“If the tax remained, the burden will be passed on to the subscribers and that would have put untold hardship on them. It is actually a victory for them. I want the government to listen more and take decisions that will improve our quest to be a digital economy. More of these types of decisions will show Nigeria is ready to use ICT to build the economy” he added.