FG proposes a 12.5% increase in telecom tax
Following the hike in the cost of petrol and electricity, the Federal Government of Nigeria has decided to raise the heat. The FG plans to reintroduce excise duty on telecommunication services. This tax will directly increase the cost of calls.
The consumption tax on telecom services is on its way to 12.5% from its current 7.5%. This increase is part of a tax reform initiative detailed in a bill entitled, ‘A Bill for an Act to Repeal Certain Acts on Taxation and Consolidate the Legal Frameworks relating to Taxation and Enact the Nigeria Tax Act to Provide for Taxation of Income, Transactions, and Instruments, and Related Matters.’
This bill is aimed at unifying fiscal legislation controlling taxation in the country. It aims to introduce excise duties on telecoms, gaming, gambling, lotteries, and betting services.
According to the bill, “Services, including telecommunications, gaming, gambling, betting, and lotteries however described, provided in Nigeria shall be charged with duties of excise at the rates specified under the Tenth Schedule to this Act in a manner as may be prescribed by the Service.”
In response to the bill, Adeolu Ogunbanjo, president of the National Association of Telecoms Subscribers had this to say, “The amount of an excisable transaction is the amount chargeable for the service by the service provider, both in money or money’s worth. This tax is going to hurt the telecom industry and subscribers alike.”
“They are essentially trying to kill the industry by imposing more burdens on it.”
The reintroduction of the excise duty comes in spite of a 2023 executive order that suspended the adoption of a five percent excise duty on telecom services. This tax has been controversial since it was first proposed in 2022. Even then, telecom operators stated that they would pass the cost on to consumers.
Telcos claim they are already overtaxed. GSMA, the global telecom industry body reports that Nigeria’s telecoms industry pays over 50 different taxes to various government arms.
At the time, Zainab Ahmed, the head of Ministry of Finance Budget and National Planning, said, “The duty rate was not captured in the Act because it is the responsibility of the President to fix rates on excise duties, and he has fixed five percent for telecommunication services which include GSM. It is public knowledge that our revenue cannot run our financial obligations, so we are to shift our attention to non-oil revenue.”
Gbenga Adebayo, chairman of the Association of Licensed Telecoms Operators of Nigeria, recently implored Bosun Tijani, the minister of Communications, Innovation and Digital Economy, to remove excise duty on telecom services.
He explained, “Collaborate with the Presidential Committee on Fiscal Policy and Tax Reforms to definitively address the perennial incidence of multiple taxation in the Nigerian telecommunications sector, including the elimination of the currently suspended excise duty on telecommunications services.”
The immediate past executive vice chairman of Nigeria Communications Commission, Umar Danbatta, stated, “Telecommunication services should be exempted from excise duty because excise duty is on luxury items. That the definition and telecommunication services cannot be considered as a luxury. You know, they are a necessity. You know they have become very much about our individual lives. And they affect more than 220 million Nigerians.”
The National Association of Telecoms Subscribers, intends to revive the court case they initiated before the tax was suspended in 2023.
“We are going to revive the case in court. When they first introduced the five percent excise duty, we went to court, but we decided to stay-action since it hadn’t been implemented. Now that the government is moving forward, we are returning to the court.” Ogunbanjo said.
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