Telecom operators in Nigeria have heaved a sigh of relief over the much awaited decision of the Federal government on the vexed issue of 5 per cent excise duty on telecommunications services.
President Muhammadu Buhari after due consultation approved the exemption of the telecommunications sector from the 5 per cent excise duty earlier imposed on telecommunications services, but later suspended for alleged inadequate stakeholders consultations.
Minister of communications and digital economy, Prof. Isa Ibrahim Pantami broke the news on Tuesday in Abuja, while briefing reporters on the outcome of the Presidential Review Committee on the excise duty for the digital economy which made its recommendations to the President.
The minister noted that the decision of the president to exempt the digital economy sector was predicated on the fact that the implementation of the tax will impose more suffering on Nigerians. He added that the digital economy sector has increased the nation’s revenue generation by 594 per cent in the last three years while ICT alone contributed 18.44 per cent to the GDP in 2022 and therefore is not to be overburdened with taxation.
Pantami said, “The president took this decision because the implementation of the excise duty will increase the suffering on Nigerian citizens and Buhari strongly suggested that other sectors that are not contributing enough are to be challenged to improve revenue generation for government and not the sector that has increased revenue generation by 594 per cent within only three years which is unprecedented in the history of Nigeria.”
In August 2022, the ministry of finance, budget and national planning and the Nigerian Customs Service had announced their readiness to start collecting excise duty on telecommunications services. This decision did not go down well with industry players as they warned of severe consequences on the sector.Pantami also kicked against it for what he described as inadequate stakeholder consultation.
This prompted President Buhari to suspend the policy in September and set up a committee headed by Pantami to review the policy. Other members of the committee were minister of finance, budget and national planning, Mrs Zainab Ahmed; the Executive vice chairman of the Nigerian Communications Commission (NCC), Professor Umar Danbatta; the executive chairman of the Federal Inland Revenue Service, Muhammad Nami and representatives of the telecommunication industries.
The minister noted that the suspension directed by President Buhari followed his petition as the chairman of the Presidential Council on Digital Economy and eGovernment, adding that the policy will impact very negatively on the digital economy sector, and particularly, telecommunications, which is already overburdened with multiple taxes totalling about 41 categories.
On whether the decision to exempt the sector from the tax conflicted with the Finance Act 2021, which captured the tax, the minister told reports in an interview that the procedure leading to the Act was not proper, adding that under section 5 of the 1999 constitution, the president has the right to take such a decision.
Pantami had argued that excise duties are usually imposed on luxury goods and not telecommunications services that are increasingly becoming essential services for the survival of the people. He stressed that it is unfair to overburden such a sector that is so central to the nation’s growth and development and especially because the sector rarely receives subsidies which other sectors have enjoyed.
“Despite the spiralling inflation, and cost of production, particularly the energy factor, the network service providers have not increased prices of services,” Pantami said.
Executive vice chairman of the NCC, Prof Danbatta, in his remarks, lauded the minister for the leadership and direction for the industry. He explained that as a regulator, the NCC has made provisions for subscribers to lay complaints in the event of exploitation and they will get instant response from the commission.
Telecom operators had kicked against the tax, saying it the timing was wrong judging by what Nigerians are passing through in the present time. recall that the Executive Secretary of the Association of Telecom Companies Of Nigeria(ATCON), Ajibola Olude, had kicked against the tax describing it as harsh and a disincentive to investment.
Speaking to our reporter on this development, an expert in the telecommunications industry who does not want his name in print praised the decision of the president to stop the implementation of the policy. He castigated the ministry of finance and the Nigerian Customs Service for being insensitive to the plight of the Nigerians, adding that the tax could have set the industry back and will discourage investors.
“We appreciate the effort of the President for removing this burden of tax. The earlier imposition of the tax was not in the interest of the industry but for few agencies of government which have no clue as to how to generate revenue. Trying to impose excise duty on already over taxed sector was insensitive. But we thank the President for coming to the rescue,” he said.
