Kill The Communication Services Tax Bill

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Senator Mohammed Ali Ndume is sponsoring a bill that seeks to impose on communication service users a nine per cent service charge for electronic communication services, including voice calls, short message service (SMS), multimedia service (MMS), data usage and Pay television. If the bill becomes law, it will also mandate the communication service providers to file monthly tax returns with the Federal Internal Revenue Service (FIRS) with severe and cumulative non – compliance penalties.

As the reality of dwindling oil revenue dawns on the nation, it becomes inevitable that the government will seek to diversify its sources of income. In such a situation, taxation comes in handy. This would have been understandable if the tax net was spread to capture those who are really evading tax. In Nigeria, it is an undeniable fact that only income earners pay tax. That is those whose sources of income are clearly defined and they are among the poor and not too poor. The rich who are adept at concealing their incomes hardly pay accurate tax, if at all.

In arguing against this proposal to impose a whole nine per cent tax on communication services consumers, we insist that it will amount to an extension of the multiple tax regime that is already hurting not just service providers  but also consumers who will be compelled to bear a burden that is unusually heavy. These string of multiple taxes include Information Technology (IT) Tax on Profit, Annual Operator Levy on Turnover, Value Added Tax (VAT) on consumption of their services and sundry taxes and levies by state and local government authorities. The impact of this will definitely be drastic as it will have an adverse effect on the broad band penetration as well as the social and financial inclusion of the less privileged consumers who are already agonising over the current harsh economic condition. It will, certainly, in our view, add more pressure to the purchasing power of the communication service users and may lead to possible increase in charges by the service providers who, confronted by a reduction in patronage, may hike service charges to meet already set targets.

On the part of the service providers already contending with multiple taxes across all of government levels, its impact will hamper investment expansion in the sector, reduce access to information, communication technology (ICT) services in the remote areas and may also reduce service usage by existing subscribers.  Industry watchers are already contending that the planned communication services tax bill will lead to increase in call charges resulting in less minutes of use on the networks

In our considered opinion, the proposed bill is not in the interest of the poor and vulnerable in the society who require incentives for social inclusion, which is what access to communication services provides. It will lead to increase in prices for consumers and be counter-productive to the longer term national digital strategy objectives set by the federal government. Furthermore, we agree with the viewpoint that the introduction of new taxes without harmonising existing ones will put pressure on the Nigerian tax system which will be unattractive to investors. The focus instead should be on stimulating the economy and ensuring that the tax system is efficient by widening the tax net and creating an effective framework for tax compliance.

We appreciate government’s concerns regarding low revenue earnings vis-à-vis widening expectations of the people who rightly demand an improvement in their wellbeing. One way of attending to that fair and urgent need of the people is not by increasing and imposing taxes on them in a manner that will limit the financial and social benefits communication services make available. On the basis of this argument, we urge the promoters of this bill to jettison it because it is anti-people.

 

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