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Despite failed bid by telcos to hike tariffs, phone calls to attract new tax regime

By Adeyemi Adepetun
23 May 2022   |   3:30 am
Indications emerged yesterday that a new tax regime has been slammed on telephone users in the country. The tax, which is being championed by the Federal Government, is to fund free healthcare for the Vulnerable Group in Nigeria.

• FG to fund free healthcare for vulnerable group via new levy

Indications emerged yesterday that a new tax regime has been slammed on telephone users in the country. The tax, which is being championed by the Federal Government, is to fund free healthcare for the Vulnerable Group in Nigeria. This is despite recent moves by telecommunication companies to increase the price of their services as a result of inflation.

Contained in the National Health Insurance Authority Bill 2021 signed by President Muhammadu Buhari, last week, the new telecoms tax in the equivalent of a minimum of one kobo per second for phone calls is a part of the sources of funds required to finance free healthcare for the Vulnerable Group in Nigeria.

The Act includes, a provision under Section 26 subsection 1C, which states that the source of money for the Vulnerable Group Fund includes telecommunications tax, not less than one kobo per second of GSM calls.

Other sources from the section include money that may be allocated to the Vulnerable Group Fund by the government, money that accrues to the Vulnerable Group Fund from investments made by the Council and grants, donations, gifts and any other voluntary contributions made to the fund.

Commenting, the Fiscal Policy Partner and Africa Tax Leader at PricewaterhouseCoopers, Taiwo Oyedele, on his LinkedIn page, said: “S.26 of this new law imposes a telecommunications tax of not less than 1kobo per second on GSM calls. With call rates at about 11 kobo per second, this translates to a nine per cent tax on GSM calls.

“The tax is one of the sources of money to the Vulnerable Group Fund to subsidise the provision of healthcare to the group defined to include children under five, pregnant women, the aged, physically and mentally challenged, and indigent persons as may be defined from time to time.”

According to the Act, the Vulnerable Group Fund is money budgeted to pay for healthcare services for vulnerable Nigerians who cannot pay for health insurance in a bid to subsidise the cost of provision of healthcare services to less privileged persons in the country.

According to the NHIA Act, every resident in Nigeria is expected to obtain health insurance. This is coming few weeks after the FG also approved the collection of five per cent excise duty on telephone recharge cards and vouchers. The five per cent charge is part of new items on the list of goods liable for excise duty on the Finance Act in the country.

Excise duty is a levy charged at the time of manufacturing. It is also a form of indirect tax on the sale or consumption of certain goods, products, services or activities such as tobacco, alcohol, narcotics, gambling, among others, mainly to discourage their use and consumption. Nigeria’s Finance Act has extended the list to include beverages and non-alcoholic drinks, among others.

This development emanated from a circular signed by the Minister of Finance, Budget and National Planning, Zainab Ahmed, which directed the Nigerian Customs to create a tariff line for the collection of the excise on mobile telephones, electricity meters (components) and set up boxes at five per cent.

The taxes are coming when the telecoms operators have also called for an upward review of about 40 per cent hike in telecoms services tariffs.

The telecoms operators under the aegis of Association of Licensed Telecoms Operators of Nigeria (ALTON), had claimed that the economic challenges, rising energy cost, Russia/Ukraine war, among others, necessitated the need for them to hike cost of calls, SMS, and data.

Based on ALTON’s proposal, the operators had said that the price floor of calls will increase from N6.4 to N8.95, while the price cap of SMS will increase from N4 to N5.61.

But in a swift reaction to the operators’ demands, the Nigerian Communications Commission (NCC) allayed fears of the public, stressing that there is no tariff hike for now.

NCC explained that before any tariff hike would be implemented, an empirical study would need to be carried out to determine the necessity of such increase.

Most mobile phone users have also observed the poor service provision from service providers, a situation many attribute to high cost of energy to power thousands of base stations across the country.