I am very confident that the proposed nine percent tax on communications services by the Federal Government which has become a controversial issue in the industry will not scale through. It will be against the interest of Nigerians because many Nigerians would be denied access to communication and the telecom industry will suffer.
Certainly, Nigeria is going through hard times, exploring ways to generate revenue to run its affairs by aiming to increase its tax base. The truth of the matter is that targeting the telecom is not the right thing to do. The telecom industry is like a bunch holding together many keys and any effort made to hamper its efforts will affect Nigerians. The proposed bill which currently awaits reading, 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.
There are lots of issues currently bedeviling the country, issues ranging from the removal of subsidy, currency devaluation, bad economy, low wages amongst other matters. However, I see this as the right step in the wrong direction.
Nurudeen Sulieman had made it clear that whatever money the Federal Government generate from the 9% tax will end up like social security stipend for sizable workers that will be laid off by the same Telecom industry that is targeting. “It’s obvious that the minister is so excited that his ministry will be generating 2 Billion Naira monthly from that tax. The target is not achievable because end user will drop by a margin unimaginable. It will also be double jeopardy because the average tax will also drop due to the low turnover by the operators.
However, the implications of the proposed tax bill are quite enormous, it’s not just the subscribers that will bear the brunt. At the moment customers are paying five percent Value Added Tax on a voice call and data subscription. By implication, if the bill scales through, we would have about 14 percent which the subscribers are expected to pay. And this, in the long run, will affect the efforts of the telecom industry to deepen broadband penetration.
Broadband penetration is one of the issues confronting the telecom industry, and there are no doubts that lots of policies and strategies have been on the ground to actualise this. The desire of the sector is to achieve 30 percent broadband penetration by 2018. Apparently, the move by the Federal Government will put that goal in jeopardy.
Gbenga Adebayo, President, Association of Licensed Telecommunications Operators of Nigeria had lamented that operators are already paying 12 per cent on ICT equipment excluding the corporate tax, which we also pay for the government and the rest of them. Administering this proposed tax, as it will be our duty as operators to collect on behalf of the government, will increase our cost of operation because we will need to bring in more hands for tax administration.
“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 customers who run only in several tens or hundreds of Naira in a month. When you compare the average minimum wage, the per capita income of the people against the implications of the introduction of this new tax, we feel that it will affect access to communication services and quite significantly too”.
Interestingly, one of the key players in the industry that kicked against the proposed tax bill was 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.
Finally, it is just necessary to weigh the effects of the proposed tax regime on the government, stakeholders as well as end users of communication services. However, in my honest view, I will encourage our leaders at various Houses of Assemblies to come up with bills that would be of tremendous value to the government and its citizenry. Definitely, not this one.