‘CST will impede telecoms N450b yearly contribution to GDP’

The Association of Telecommunications Companies of Nigeria (ATCON), has warned that approving the proposed Communications Service Tax (CST) will cut down the sector’s N450 billion yearly contribution to the country’s Gross Domestic Product (GDP).

ATCON’s President, Olusola Teniola, who said this during an interview in Lagos, insisted that passage into law of the CST Bill will prevent Nigerians from having access to affordable voice and data tariff.

Teniola’s call comes on the heels of the move by the Senate to increase Nigeria’s tax revenue through the CST Bill, which has passed the first reading. The bill is being sponsored by Borno-born Senator Ali Ndume.

The CST when passed into law will be levied on the consumers of voice calls, MMS, SMS, data usage and Pay per View TV services provided by mobile telecommunication and internet service providers.

Teniola said government can look at other means of increasing taxes, especially by widening the tax base, noting that the telecoms sector is currently faced with the challenge of multiple taxes.
This, had resulted in service providers paying about 39 different taxes on an already overburdened sector, which adds about N450 billion to the country’s GDP.

“That contribution will increase if the sector is allowed to breathe, and it will go down, if the sector is stifled with unnecessary taxes. Government should look at reducing its cost. Senators should rather also look at how government spends this N450 billion rather than promoting bills that will stall inclusion.’’

From his perspective, the National Association of Telecommunications Subscribers of Nigeria (NATCOMS), Deolu Ogunbajo, the argument that the CST is targeted at the rich is not sustainable because about 75 per cent of people, who own phone in Nigeria, are poor, and should rather widen the tax net.

Similarly, the Alliance for Affordable Internet (A4AI), chaired by pioneer Minister of Communications Technology, Dr. Omobola Johnson, warned that the new tax being considered by the National Assembly will prevent over 50 million Nigerians from being able to afford basic broadband connection.

This is because the bill would make basic Internet connection unaffordable for an additional 20 million Nigerians.

Under the bill proposal, failure of telcos to file returns attracts N50,000, and N10,000 fines daily until compliance, while non-remittance of tax will attract a monthly interest on the unpaid tax at 150.0 per cent of lending rates by commercial banks.

To analysts at Afrinvest, the CST Bill will overburden consumers who already bear 5.0 per cent Value Added Tax (VAT) on telecommunications services.

They argued that the bill will worsen the issue of tax multiplicity, as in addition to existing taxes, companies will bear increased costs of compliance and lower patronage as consumers react negatively to new taxes.

Besides, with the sector contributing about 1.2 per cent to the real GDP growth of 1.9 per cent in Q2:2019, there is the likelihood of even slower economic growth.

“We do not expect the CST to generate as much as the proposed VAT of 7.5 per cent, which we conservatively estimate to bring in additional N545.1 billion as VAT revenue. Revenues from the CST of 9.0 per cent would clearly fall short of the FG’s expected increase in VAT, even without considering the changes to consumer demand and growth in the sector.

“We believe the FG’s approach towards taxes could affect economic growth and dampen the investment climate, with negative implications for tax collections,” Afrinvest said.