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Stakeholders fault proposed telecoms tax

By Adeyemi Adepetun
17 May 2016   |   2:50 am
Should the bill on Communications Service Tax (CST) be passed into law, about 50 million subscribers might not be able to afford basic broadband services.


Should the bill on Communications Service Tax (CST) be passed into law, about 50 million subscribers might not be able to afford basic broadband services.

Analysis by the Alliance for Affordable Internet (A4AI)-Nigeria Coalition, at the weekend, showed that the proposed nine per cent tax to be levied on consumers of communications services would disenfranchise more subscribers from having access to telecommunications services, including broadband.

A4AI stressed that the passage of such a tax is likely to threaten Nigeria’s ability to achieve its goal of 30 per cent broadband penetration by 2018 and to undermine the socio-economic progress spurred by increased connectivity.

The CST bill 2015, currently with the National Assembly, would require consumers of voice, data, SMS, MMS and pay TV services to pay a nine per cent tax on the fees paid for the use of these services.

Apart from the A4AI, industry groups, including the Association of Licensed Telecommunications Operators of Nigeria (ALTON); Association of Telecommunications Companies of Nigeria (ATCON) and the National Association of Telecommunications Subscribers (NATCOMS) have jointly wrote a letter to the Minister of Finance, Mrs. Kemi Adeosun and Minister of Communications, Adebayo Shittu, about the dangers the new tax system portends for the industry if it becomes a law.

The Global System for Mobile telecommunications Association (GSMA), the body, which represents mobile operators worldwide, also concurred with others in the letter, dated March 30, 2016, a copy of which The Guardian obtained.

The Guardian gathered that this tax would be collected on top of the five per cent Value Added Tax (VAT) that consumers already pay when they purchase devices and communication services, the 12 per cent custom import duties paid on ICT devices, and the 20 per cent tax levied on SIM cards.

Besides, mobile operators and service providers will be responsible for collecting consumer payments and must fulfill additional reporting obligations that are likely to increase operational costs and therefore service fees for consumers.

Commenting on the proposed law, National Coordinator for the A4AI-Nigeria Coalition, Dr. Ernest Ndukwe said: “Balanced fiscal policy must consider affordability of broadband and ICT, and should not put into place additional barriers that would make Internet access unaffordable for hundreds of millions of Nigerians. Nigeria is far behind the more developed countries of the world when it comes to broadband use, and the introduction of the CST will only widen this gap.

“The National Assembly must reconsider the passage of the CST and its impact on the development of broadband in Nigeria. After such a review, if the introduction of a CST is deemed an absolute necessity, it must consider a lower tax rate than nine per cent, one that would enable it to achieve fiscal revenue targets without undermining broadband affordability and access.”

According to the letter sent to the ministries of Finance and Communications respectively signed by Mortimer Hope, Director Africa, GSMA; Gbenga Adebayo (ALTON); Lanre Ajayi (ATCON) and Chief Adeolu Ogunbanjo (NATCOMS), the bodies stressed that if introduced, such tax will result in an increase in prices for consumers, have adverse impacts on the adoption of mobile services and industry investment, and be counter-productive to the longer term national digital strategy objectives set by the government.

Commenting on the matter, the Chief Executive Officer of Airtel Nigeria, Segun Ogunsanya, said the planned tax bill would lead to increase in call charges resulting in less minutes of use on networks.

Ogunsanya seeks sector’s engagement with the NASS to dock the tax bill and the communications bill, 2016 in view of the potential adverse impact on the industry.

Furthermore, the bodies reminded the lawmakers that the socio-economic impact of mobile penetration has been widely recognized.
They made reference to a research conducted by the World Bank, which predicted that a 10 per cent increase in mobile broadband penetration in low to middle income countries led to 1.38 per cent increase in GDP growth.

According to them, to connect the yet to be connected Nigerians to the mobile platform, affordability remains a key challenge to connect the unconnected, who are typically lower income population groups.