Nigerian government removes 5% tax on calls, data, lessons for Ghana

Nigerian government

The Nigerian Federal Government has announced the removal of its proposed five per cent excise duty on telecommunication services.

The government announced that this was in line with the recommendations of the Presidential Review Committee on Excise Duty in the Digital Economy Sector, which was constituted to review the implementation of excise duty in the telecom sector. The Minister of Communications and Digital Economy, Isa Pantami, disclosed this on Tuesday, March 21, 2023, at a press briefing.

Pantami, who is the chairman of the committee, said, “I am happy to report to you that President Muhammadu Buhari, GCFR, has approved the exemption of the digital economy sector from the five per cent excise duty to be paid and this is because of the strength of the argument presented to him by the Committee that additional burden on telecom sector will increase the sufferings of Nigerians and that other sectors that are not making as much contribution to the economy should be challenged to do more and pay the five per cent excise duty.”

According to him, if the tax had been upheld, many businesses will have felt its impact. He said, “Many MSMEs and SMEs depend on the sector for survival; if the tax is increased, the impact will take a toll on these businesses.

Pantami stated that the telecoms sector was already paying 41 categories of taxes, levies, and charges.  He added, “There is no need for excise duty in the telecom sector because the industry is already heavily taxed up to 41 taxes. The sector has been contributing hugely to Nigeria’s economy; more tax burden destroys the industry.

“We increased revenue generated by 594 per cent from N51 billion quarterly to N481 billion quarterly. This is the only sector where the prices of services have been reduced. here is no justification for the government to impose more burden on its poor citizens.”

He noted that the tax exemption will be upheld by the incoming administration. In July 2022, the Federal Government announced plans to implement a five per cent excise duty tax on telecom services in a bid to increase its revenue sources.

The Minister of Finance Budget and National Planning, Zainab Ahmed, through the assistant Chief Officer of the Ministry, Mr Frank Oshanipin, had announced.

She 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 per cent 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.”

At the time, telecom companies stated that the tax would be paid by telecom consumers, increasing consumption tax on telecom services to 12.5 per cent. The government later suspended the implementation of the tax and set up a committee to review it.

During the process, a document titled ‘Invitation to a One Day Public Hearing and Submission of Memoranda on the 2022 Finance Bill,’ indicated that the government might be considering the implementation of excise duty in 2023.

To counter this, telecommunication consumers under the aegis of the National Association of Telecoms Subscribers sued the Federal Government in court.

The National President, NATCOMS, Adeolu Ogunbanjo, told The PUNCH in February that the association had filed a suit at the Federal High Court Ikoyi, challenging the government over the many taxes in the sector and increasing cost burden on telecom consumers.

Reacting to the cancellation of the excise duty on Tuesday, Ogunbanjo insisted that the consumer association would continue with its case in court until the government backs up its action with law.

He said, “We cannot withdraw our case until the law is repealed or it has the backing of the law. They need to give it the backing of the law because even though he has said this, the new administration can introduce it again.

“The next administration will be looking to increase revenue. So, until it is amended or repealed, we will still be in court. The next president can always introduce it again. We are in court already and are pursuing it.”

He added that while the association is grateful for the gesture, it will continue to pursue its case until a law guarantees that no administration can reintroduce the tax.

Ghana

Meanwhile, in Ghana, the government continues to charge a 5% Communications Service Tax, which is a reduction from 9% just a couple of years ago. There have been several reasonable protests against the tax but the subsequent governments would not budge even after several promises to abolish the nuisance tax.

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