Fed Govt suspends five per cent tax on telecoms services

The Federal Government has suspended its planned implementation of the five per cent tax on telecommunications services, Communications and Digital Economy Minister Isa Pantami announced yesterday.

Pantami’s announcement came barely a month after stakeholders, including Mobile Network Operators (MNOs), subscribers’ groups – National Association of Telecom Subscribers (NATCOMS) and Association of Telephone, Cable TV and Internet Subscribers of Nigeria (ATCIS)  (MNOs) kicked against the idea.

They said it would be one tax too many for operators who have more than 41 levies and dues to pay to the three tiers of government.

The tax on voice calls and text messages (Short Message Services), among others, was to be imposed on behalf of the Federal Government by the Nigeria Customs Service (NCS) government.

The Federal Ministry of Finance, Budget and National Planning had pushed for the implementation of the tax based on the passage of a law by the National Assembly.

Announcing the suspension yesterday, Pantami said the step was informed by the need for stakeholders to critically look at developments in the industry so as not to over-burden the sector with taxes.

Reacting to the tax early last month, Pantami said: “I have not been contacted officially. If we are, we surely will state our case. The sector that contributes to the economy should be encouraged. You introduce excise duty to discourage luxury goods like alcohol. Broadband is a necessity.

“If you look at it carefully, the sector contributes two per cent excise duty, 7.5 per cent VAT to the economy and you want to add more.”

Noting that complicating the citizens’ hardship cannot be tolerated, the minister said he had urged the tax masters to expand the scope of other sectors that are not contributing to the economy to do so.

He said: “We must come together and salvage the sector. Only the telecom sector contributed 13 per cent and you want to add more.”

Speaking at the inaugural meeting of the Presidential Committee on Excise Duty on the Digital Economy Sector at the Digital Economy Complex, Abuja in his capacity as chairman, Pantami said that within the past few years, he had resisted attempts to increase taxes in the sector for about 15 times.

According to him, the telecoms sector remains the backbone of the economy with one of the operators paying over N757 billion in 2021 as taxes to the Federal Inland Revenue Service (FIRS).

Pantami said he had briefed Presidential Muhammadu Buhari on developments in the sector and the need to sustain the unprecedented achievements recorded, rather than cripple them with fresh taxes.

He explained that it was on that basis that Buhari approved his chairmanship of the Committee with Finance, Budget and National Planning minister; Federal Inland Revenue Services (FIRS) chairman; Nigerian Communications Commission (NCC) Executive Vice Chairman Prof Garba Danbatta and MNOs representatives as members.

He said the membership of committee could be expanded.

Pantami said the digital economy sector has contributed more to the nation’s Gross Domestic Product (GDP) over the years with the latest being the 18.44 per cent contribution in Q2 of 2022.

He said the Committee has been mandated to be fair and objective to all stakeholders with a view to advising the President appropriately.

The minister said: “This sector has been contributing a lot to the economy of Nigeria particularly at the time that all other sectors are coming down in spite of government’s investment in the area of subsidy.

“But the digital economy sector, without any significant subsidy, has been recording unprecedented achievement year in year out.

“Last year and early this year, the federal government conducted the auctioning of the 5G spectrum,  this generated $547 million for Nigeria in addition to billions and billions that we have been remitting through spectrum licence, operating licence, among others.

“By implication, the ICT sector is today the backbone of our economy in Nigeria, the backbone of our tax collection. For example, just to single out one telecom operator, in 2021 MTN alone contributed approximately, 13.5 per cent of the entire tax collection by the FIRS, only MTN and it was the largest contributor to the tax collection to the extent that FIRS had to celebrate the effort and remittance of MTN.

“And all these things are happening under our supervision because companies hardly remit until there is supervision by regulators.

“In that year, MTN alone remitted N757 billion through direct and indirect tax to FIRS in 2021 and there wasn’t any company that contributed up to another amount.”

The minister drew attention to the fact that about 41 different taxes are being collected already in the telecommunications industry by the Federal and State governments, saying it would be too much to slam another tax on the industry.





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