NCC, telecom operators and 5% excise duty

The plan to introduce a 5% excise duty on telecommunications services, despite a 7.5% Value Added Tax (VAT) that Nigerians already pay for goods and services, is still causing controversy in the telecommunications sector.

If the policy is eventually implemented, telecom subscribers would pay 5% of the total cost of the voice call they place. Payment will be withdrawn from the subscriber’s account by the telecom operator, who will pass it on to the government. This will increase the voice call rate by 100%.

“The 5% excise duty is in the 2020 budget law but has not been implemented,” Minister of Finance, Budget and National Planning, Ms. Zainab Ahmed, said recently during a a stakeholder forum on excise duty in Abuja.

Ms. Ahmed was represented at the event by a Deputy Director, Fiscal Policy, Federal Ministry of Finance, Budget and National Planning, Musa Umar, while the Deputy Director of the Ministry, Frank Oshanipin made the presentation of the Ministry.

The ministry said the delay in implementing the 5% excise duty was the result of the government’s engagement with stakeholders. He added that payments would be made on the 21st of each month.

He added: “The rate of duty was not reflected in the law because it is the President’s responsibility to set the rate of excise duty and he has set the rate of duty for telecommunications services at 5%. , which include GSM services.

“It is common knowledge that our revenues cannot meet our financial obligations, so for this purpose we must turn our attention to non-oil revenues. The responsibility of generating revenues to run the government lies with all of us.

The President of the Association of Licensed Telecom Operators of Nigeria (ALTON), Gbenga Adebayo, however, said operators would not be able to subsidize the 5% excise duty on telecom services due to the 39 taxes multiples they pay, coupled with the epileptic power situation that had forced operators to spend so much on diesel.

The Chairman of the Association of Telecommunications Companies of Nigeria (ATCON), Ikechukwu Nnamani, who was represented by ATCON Executive Secretary, Ajibola Olude, said: “The 5% excise duty on telecommunications services does not would not be in tandem with current realities,” adding that the industry was bleeding.

Olude suggested the idea be dropped as it would result in job loss.

“The idea is ill-timed and ill-intentioned because the industry is not doing well right now,” he said.

However, Ms. Ahmed insisted on the implementation of the proposed 5% telecommunications tax on calls and data. In a statement by the Minister’s Special Media Advisor, Mr. Tanko Abdullahi, in Abuja recently, the Minister cited the Finance Act 2020 as enabling legislation for the levy.

But the finance minister said she would apply the tax on all voice calls, text messages and data services, in addition to the 7.5% value added tax, VAT, paid for goods and services in all sectors of the economy.

The 5% excise duty was highlighted at a recent stakeholder meeting, hosted by the Nigerian Communications Commission, NCC, the telecommunications industry regulator.

During this meeting, the Minister of Finance, represented by Deputy Director Umar, said: “The excise duty of 5% is included in the Finance Law 2020, but has never been implemented.

“From now on, the 5% excise duty will be collected by telecommunications operators and paid to the federal government on a monthly basis, no later than the 21st of each month.”

Ms. Ahmed said there was a circular indicating the expected hike, which was addressed to the Minister of Communication and other relevant ministries and government agencies.

She said: “The circular referenced No. F. 17417/VI/286 dated March 1, 2022 and entitled “Approval of the implementation of fiscal policy measures and tariff changes for 2022” was sent to various ministers, including the Minister of Communications and Digital Economy and other heads of government agencies.

“The circular was addressed to the Secretary of the Government of the Federation, Attorney General of the Federation, the Ministers of Industry, Trade and Investment, Agriculture and Rural Development, Mines and Steel and Development.

“This therefore means that all the stakeholders have, through this singular provision, become aware of the act.

“The excise duty on telecommunication services provided in Nigeria introduced by the Finance Act 2020 with statutory enactment on January 1, 2021 has yet to be implemented in view of the need to ensure a transition period reasonable before the implementation of the new tax, as well as to provide clarity to all stakeholders on the modalities of implementation.

“For emphasis, Ms. Ahmed had, in a circular dated March 1, 2022, informed the Nigeria Customs Service (NCS) and other Heads of Ministries, Departments and Agencies (MDAs), including the Federal Ministry of Communication and the Digital Economy, regarding the President’s approval of the implementation of the 5% excise duty on telecommunications services as of June 1, 2022.

“An issue as serious as the excise tariff cannot be taken in isolation as all stakeholders and agencies have been involved including the Manufacturers Association of Nigeria (MAN) and the Telecommunications Operators Association of Nigeria (ALTON), who wrote to the department to get involved in the terms of the excise duty.

But the Minister for Communications and Digital Economy, Professor Isa Ali Pantami, and the Nigerian Communications Commission (NCC) opposed the tax which they called untimely.

Pantami in his address at the first edition of the Nigerian Telecommunications Indigenous Content EXPO (NTICE) on the topic

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“Boosting Indigenous Content Development through Innovation and Commercialization” in Lagos highlighted the need for government and stakeholders to continue to support the sector and not place an unnecessary burden on it.

“The Minister for Communications and the Digital Economy is not happy with any effort to introduce telecommunications excise duties. When the VAT was increased to 7.5%, I was not consulted; I only heard the announcement and I think there is something questionable, and I am glad that we are on the same wavelength with our deputies in the National Assembly. They too were not consulted despite the fact that they are part of the committee.

“Beyond making our position known, we will go behind the scenes and oppose any policy that destroys the digital economy sector. It is a sector that we cherish so much and we are ready to do everything, legitimately and legally, to defend its interests,” said Professor Pantami.

Similarly, the Executive Vice President/CEO of the NCC, Prof. Umar Garba Danbatta, who was represented at the Stakeholder Meeting in Abuja by the Executive Commissioner, Stakeholder Management, Adeleke Adewolu, said in his keynote speech. Opening: “As communicated in the Federal Government Circular Report of March 1, 2022, the 5% excise duty was to be implemented as part of the 2022 fiscal policy measures, but industry considered the The earlier planned effective date of June 1, 2022 was insufficient and we have duly discussed this with the Federal Government.”

In addition, NCC Public Affairs Director, Mr. Reuben Mouka, said that “the Minister has made his position public and that is NCC’s position as well.”

Mouka said NCC has always made sure call and data rates go down.

The NCC spokesman told the Daily Trust that the commission had been at the forefront of a steady reduction in telecoms services, even despite rising operating costs by operators.

He added that the 5% excise duty does not come from NCC. In fact, “our Minister’s position is clear on this.

“The NCC has been consumer-centric in all of its activities,” he said.

Through effective regulatory efforts, he said the commission has ensured that the cost of calls has dropped from around 70 naira per minute a few years ago to around 20 naira per minute now.

“We stopped mobile operators from raising prices anyway. Rate increases and promotion of any kind that may result in increased traffic are reviewed by the NCC to ensure they are fair to consumers,” he added.

He explained that NCC consults widely; it conducts cost-based studies to ensure evidence-based regulatory interventions that help consumers access telecommunications services at moderate prices.

The NCC, he said, is currently striving to reduce the cost of data to N390 per gigabyte of data by 2025 as outlined in the Nigerian National Broadband Plan (NNBP).

Regarding multiple taxation, he said that the NCC has reached an agreement with many states in the country on reducing taxes on telecom operators. He reiterated that the NCC is not a party to the 5% excise duty and that the commission is always an advocate for lower tariffs to benefit consumers.

“That is why NCC does not allow any operator to impose tariffs arbitrarily.

“Recently, when ALTON threatened to increase rates citing rising operating costs, NCC even issued a statement opposing any increase,” he said.

He said that telecommunications is the only sector where the cost of obtaining services has fallen since the liberalization of the sector despite the increase in operating costs borne by operators.

He said this is tied to effective regulation of the industry where NCC ensures strong and healthy competition among licensees.

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