The Nigerian government is expected to make over N200 billion annually as the new five per cent telecommunications tax goes into effect. Telecommunications subscribers are to pay five per cent tax on calls, SMS and data services in addition to the existing 7.5 per cent Value Added Tax (VAT) on telecommunications services meaning that subscribers get to pay 12.5 per cent as tax on all telecom services.
Minister of Finance Budget and National Planning, Zainab Ahmed, had indicated a couple of weeks back that the government needs to tax non-oil sectors to remain solvent.
Her words: “Payments are to be made on monthly basis, on or before 21st of every month. The duty rate was not captured in the Act because it is the responsibility of the president to fix 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.”
But telecom operators are warning that additional tax could undermine mid to long term growth and counter all short term revenue expectations by government.
It would be recalled that telcos recently proposed a 40 per cent hike in the cost of calls, SMS, and data in the light of the unfavourable operating environment. The Nigerian Communications Commission (NCC), however, argued that a hike in price could stunt consumers’ spending for existing and envisaged services.
Subscribers spent about N2 trillion on calls and data in the first six months of 2020 according reports. In 2021, it was N1.77 trillion. Available data for Q1 and Q2, 2022 shows that subscribers have spent over N1,25 trillion on telephony services.
The industry associations are worried. The Association of Licensed Telecoms Operators of Nigeria (ALTON) has warned that while subscribers will bear the brunt of the tax, it is the sector that will ultimately get burnt out.
Similarly, the Association of Telecommunications Companies of Nigeria (ATCON) has warned that the government may be scaring off consumers from leveraging telecom services as the higher taxes could mean lesser patronage and stifling of real growth.