FG Plans To Impose Five Percent Excise Levy On Telecom Services

The Federal Government of Nigeria has proposed a five% inclusive excise duty on telecommunications services in Nigeria, which will result in Nigerians soon having to pay 12.5% tax on those services.

This was said by Zainab Ahmed, Minister of Finance, Budget, and National Planning, on Thursday in Abuja at a stakeholders' roundtable on the application of the excise duty on telecommunications services in Nigeria.

The Nigerian Communications Commission organised (NCC) the event.

The existing Value Added Tax (VAT) on telecommunications services, which is 7.5%, will be increased by 5%.

According to Zainab, who was represented by the Assistant Chief Officer of the Ministry, Frank Oshanipin, the financial Act: 2020 included a five percent excise fee that was never put into effect.

She said that the government's interaction with stakeholders caused the delay in its implementation.

“Payments are to be made on a monthly basis, on or before the 21st of every month.

“The duty rate was not captured in the Act because it is the responsibility of the President to fix the rate on excise duties and he has fixed five per cent for telecommunication services which include GSM.

“It is public knowledge that our revenue cannot run our financial obligations, so we are to shift our attention to non-oil revenue.

“The responsibility of generating revenue to run government lies with us all,” she said.

The burden will fall on telecom users, according to Gbenga Adebayo, Chairman of the Association of Licensed Telecom Owners of Nigeria (ALTON).

“It means that subscribers will now pay 12.5 per cent tax on telecom services, we will not be able to subsidise the five per cent excise duty on telecom services.

“This is as a result of the 39 multiple taxes we already paying coupled with the epileptic power situation as we spend so much on diesel,” he said.

The five percent excise charge on telecom services, according to Dr. Ikechukwu Nnamani, president of the Association of Telecommunications Companies of Nigeria (ATCON), is out of step with current reality.

Ajibola Alude, the Executive Secretary, acted as Nnamani's representative.

He said that the industry was in dire straits and urged that the 5% excise duty be reduced because it might result in job losses.

“It is not well intended, because the industry is not doing well currently,” he said.

All active telecom service providers will pay the 5% excise charge, according to the Controller General of Nigerian Customs (NCS), retired Col. Hameed Ali, who was represented by the Assistant Controller, Lami Wushishi.

Gbolahan Awonuga, Executive Secretary of ALTON, claimed that the industry was not healthy with the 5% excise duty.

According to Awonuga, the telecom service providers already give the NCC 2% of their annual earnings.

“We pay two per cent excise duty to NCC from our revenue, 7.5 per cent VAT and other 39 taxes.

“We are going to pass it to the subscribers because we cannot subsidise it,” he said.

In his remarks, Prof. Umar Danbatta, the executive vice chairman of the NCC, stated that the excise duty was supposed to be applied as part of the fiscal policy measures for 2022.

According to Danbatta, the industry had deemed the initial June 1 start date unsatisfactory and had properly brought this up with the Federal Government.

He said that in order to obtain the necessary clarifications, the NCC has contacts with the federal ministry of finance, the Nigerian customs department, and advisers from the World Bank.

“These engagements enabled us to understand better the excise duty's objectives and proposed implementation mechanisms.

“We consider it imperative that these implementing agencies should also meet directly with telecom industry stakeholders to address areas of concern.

“As the regulator of the telecoms industry, we are responsible for ensuring that industry stakeholders understand their fiscal and other obligations, so that they can maintain full compliance with government policy,” he said.

He added that the excise duty covered both pre-paid and post-paid telecommunications services.