FG shifts implementation of 5% telecoms, beverages tax to 2023

Following criticisms from relevant stakeholders, including the private sector groups, Federal Government has shifted the implementation of its proposed 5 per cent excise duties on telecommunication services and beverages to 2023.

The Government has projected generating about N160.46bn from excise duty on telecom services if the regime is implemented in 2023.

Budget Office of the Federation, which is under the Ministry of Finance, Budget and National Planning, revealed this plan in its ‘2023 – 2025 Medium Term Expenditure Framework and Fiscal Strategy Paper,’ released last Friday.

According to the ministry, this was in a bid to boost the country’s non-oil revenue streams.

The minister, Mrs Zainab Ahmed, further said that it expected excise duty revenue to grow exponentially because of the introduction of telecoms service charge.

Discussing the tax which is under the purview of the Nigeria Customs Service (NCS), the government said the Service would introduce frameworks for recovering duties, taxes, and appropriate fees from transactions conducted over electronic networks.

“Full implementation of excise duty on telecom services, alcoholic, sugar-sweetened beverages, cigarettes and tobacco products.

“Therefore, excise revenue is expected to grow exponentially because of the introduction of the telecom service charge and SSBs,” the office said.

It explained that the law now empowered the FIRS to appoint anyone as its agent to withhold or collect VAT and remit same to the service.

“Revenue generation remains the major fiscal challenge of the Federal Government.

“The systemic resource mobilisation problem has been compounded by recent economic recessions. Recognising that domestic revenue mobilization is important for sustainable development, the Federal Government has instituted the Strategic Revenue Growth Initiatives to improve government revenue and entrench fiscal prudence, with emphasis on achieving value for money.

“These measures include improving the tax administration framework, including tax filing and payment, as well as the introduction of new and/or further increases in existing pro-health taxes like excise on sugar-sweetened beverages, tobacco, and alcohol. Mixed reactions have greeted the implementation of these measures,” the Office added.

Speaking at a stakeholders’ forum on the implementation of excise duty on telecommunications services in the country, the Minister of Finance Budget and National Planning, Zainab Ahmed, who spoke through the Assistant Chief Officer of the Ministry, Mr Frank Oshanipin, explained that ‘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 the non-oil revenue. The responsibility of generating revenue to run the government lies with us all.”

However, the Minister of Communications and Digital Economy, Professor Isa Pantami, last week, criticised the policy, saying his ministry was not consulted before the planned implementation of the controversial five per cent excise duty on telecommunication services in the country.

Pantami also warned that the process was ill-timed and undermined government’s desire to be responsive to the challenges in the industry.

The Ministry of Finance, Budget and National Planning had earlier announced plans to effect a 12.5 per cent tax on calls and data services provided by telecommunications companies as it moved to implement the 5 per cent inclusive excise duty on operators’ services in the country.

Also, reacting, the Chairman, Association of Licensed Telecom Owners of Nigeria (ALTON),Gbenga Adebayo, said the burden would be on telecommunications consumers.

“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 noted.

Executive Secretary of ALTON, Gbolahan Awonuga, said the five per cent excise duty was not healthy for the industry.

According to Mr. Awonuga, the telecom service providers were already paying two per cent of their annual revenue to the NCC.

“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.

On his part, the President of the Association of Telecommunications Companies of Nigeria (ATCON), Ikechukwu Nnamani, said the five per cent excise duty on telecom services did not conform with present realities.

Mr. Nnamani was represented by the Executive Secretary, Ajibola Alude, said that the state of the industry was bleeding and suggested that the five per cent excise duty be stepped down as it could lead to job losses.

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

Meanwhile, speaking at the maiden edition of Nigerian Telecommunications Indigenous Content Expo (NTICE), organised by the Nigeria Office for Developing Indigenous Telecoms Sector (NODITS) of the Nigerian Communications Commission (NCC),  last Tuesday, Pantami expressed worry that further taxing the sector could impact negatively on its contribution to the country’s Gross Domestic Product (GDP).

“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 (value added tax) to the economy and you want to add more.”

Reacting to the tax on beverages, the Manufacturers Association of Nigeria (MAN), similarly, criticised the policy which it claimed would further kill the already struggling sector in the country.