Who needs communication service tax bill?

Something controversial is brewing in the National Assembly. It is not the debate about the members’ allowances or the federal budget. It is not about any attempt to change the leadership of any of the two chambers. It is about a legislation that will have negative impact on the communication industry – its operators and particularly the subscribers.

Both the Senate and the House of Representatives have commenced the legislative process to enact the Communication Service Tax Bill, which seeks to impose additional charges on users of electronic communication services in Nigeria. The tax will be charged at the rate of nine percent of the fees payable for the service and will be borne by the customers. The extra tax will be applied on voice calls, SMS, MMS, Data and Pay TV viewing, among other services. Service providers will collect this tax from the subscribers and remit to the Federal Inland Revenue Service on a monthly basis.

The proposed law stipulates penalties for failure to remit the tax to the government coffers. A fine of N50,000 is to be imposed on any service provider that fails to remit the funds by the prescribed date, plus an additional N10,000 per day until remittance is confirmed.

It is not in doubt that the impending Bill is not in the interest of either the subscribers or businesses in the sector. For the subscriber, the CST will increase the cost of communication services thereby making services unaffordable especially to the poor and the vulnerable.

Despite the nearly 150 million mobile lines reported by the Nigerian Communications Commission (NCC) in its recent update, in truth, only about 83 million people in Nigeria have access to mobile communication service. There is a high incidence of multiple SIM cards in the country. That figure means that about half of the Nigerian population is still denied the fundamental right, which access to communication has become. It is disturbing that affordability has been the hurdle between the unconnected population and access to communication, which the proposed CST Bill will not help to redress but rather compound.

The CST Bill, if implemented, will also be a cog in the wheel of implementing the National Broadband Plan (NBP). The International Telecommunication Union (ITU) had given Nigeria the mandate to achieve 30 per cent broadband penetration by 2018, which is only two years away. In spite of the huge investment by the government and industry operators, Nigeria has achieved only 10 per cent broadband penetration at the moment. If Nigeria is to catch up with lost ground and meet up with the expectations of the global community in the area of affordable broadband service, the CST Bill, which spells more cost for the subscribers, must be thrown out of the window by the National Assembly. It is inimical to the realisation of the NBP goals.

If Nigeria goes ahead with the CST Bill, the additional charges that will come with it will reduce the subscriber’s buying power and nullify the objective of making communication service available to the poor and the vulnerable. The CST Bill will amount to double taxation because consumers already pay Value Added Tax (VAT) on communication services.

It might interest you to know that this apparent blind pursuit of taxation income by the federal legislature, which is bound to take more from the ordinary citizen than it gives, would result in the mortgaging of all the gains of the liberalisation of the telecom sector. Between 2011 and 2013, the telecommunications sector in Nigeria attracted about $6 billion worth of investment, which accelerated Information Communications Technology (ICT) contributions to an estimated 10 per cent translating to about $50 billion. As at 2014, the boom in the nation’s telecommunications’ sector was valued at $19 billion. It contributed immensely to Nigeria becoming Africa’s biggest economy. The sector moved from 0.8 per cent of Gross Domestic Product (GDP) to 8.6 per cent.

To ensure that Nigeria sustains its status as the largest economy in Africa, the telecommunications industry has made plans to improve on its 10 per cent contributions to the nation’s GDP to 25 per cent by 2025, which will be worth over $150 billion. At a forum last year, NCC pledged to provide an enabling environment and good policies that would further boost the industry in the coming years. All these gains would be lost should Nigeria accept the poisoned challis called the CST Bill.

The obnoxious Bill is discriminatory because it targets only the communication industry to the exclusion of other sectors of the economy. Rather than overtax an already overburdened industry and its populace, government needs to stimulate the economy and encourage the adoption of communication service by all – whether rich or poor. Government’s focus should be to expand the tax base to include taxable people
and sectors that are currently not included and those that are evading
tax.

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. The proposed CST Bill is an ill wind that would blow the country no good.

• Funtua is a tax consultant based in Abuja