5% Excise Duty: Multiple Taxations Unbearable For Telecom Sector –Pantami

The Honourable Minister of Communications and Digital Economy, Prof. Isa Ali Ibrahim Pantami, has stated that the federal government had to suspend the Five Per Cent (5%) Excise Duty on telecommunication services following the multiple taxations the sector is facing already.

Recently, the Minister of Finance, Budget and National Planning, Dr. Zainab Ahmed announced that 5% excise duty tax would be charged on telecoms services such as voice calls, short message service (SMS) and data services.

This announcement rattled the telecommunications sector stakeholders who quickly alerted on the danger of such additional tax as the sector was already bleeding from multiple taxes and duties across all levels of government. If the calls had stayed, telecom subscribers would have paid N12.95k per second voice call.

Pantami’s Intervention

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The Honourable Minister who was not formally consulted or communicated to by the Finance Ministry before the announcement, also voiced his opposition to it at public event in Lagos recently. Prof Pantami who oversees the policy director of the telecom sector and digital economy, did not take the matter lightly as he quickly wrote to President Mohammed Buhari to suspend the implementation.

He recalls that the immediate suspension directed by Mr. President, followed his petition as the Chairman of the Presidential Council on Digital Economy and eGovernment, as the policy has the potentials to impact very negatively on the digital economy sector, and particularly, telecommunications, which is already overburdened with a plethora of taxes totalling about 41 categories.

He said some of these are multiple taxations because other tiers or levels of government were imposing same levies that mobile network operators (MNOs) had already paid to the Federal Government.

Announcing the suspension of the tax, Pantami said: “It is because of my intervention that the President granted my prayers. He not only granted immediate suspension of the excise duty in the digital economy sector, but also approved that a committee be constituted to look into the matter carefully and advise accordingly.

“The president has appointed me to be his eyes and ears in the sector and it is my responsibility to ensure we are just and fair to the operators, government and most importantly our people that are the consumers,” the minister added.

Explaining how he got the ears of the president to suspend the tax, Pantami said he petitioned the President and reminded him that excise duty is usually fixed on luxury products.

“Excessive taxation has been a central challenge of the Information and Communications Technology sector”, he said, arguing that it is unfair to overburden such a sector that is so central to the nation’s growth and development and especially because the sector rarely receives subsidy which other sectors have enjoyed.

“Despite the spiralling inflation, and cost of production, particularly the energy factor, the network service providers have not increased prices of services. I challenge the Gentlemen of the press here to name one sector that has not witnessed price increases in services in the last three years. It is only in telecoms that prices have been stable”, he said.

The Review Committee

Following the suspension of 5% excise duty on telecom services by President Buhari, Pantami, who inaugurated the Committee, which he chairs on the directive of President Muhammadu Buhari, with the Minister of Finance, Budget and National Planning, Dr. Zainab Ahmed as member, said the decision on the suspended policy will be made after the committee completes its report.

Other members of the committee inaugurated by Pantami, include the Executive Vice Chairman and Chief Executive Officer (EVC/CEO) of Nigerian Communications Commission (NCC), Prof. Umar Danbatta; the Executive Chairman of Federal Inland Revenue Service (FIRS), Mr. Muhammad Nami; and the representatives of Mobile Network Operators (MNOs).

Telcos Applaud Minister

The National Chairman, Association of Licenced Telecommunications Operators of Nigeria (ALTON), Engr Gbenga Adebayo said the suspension was a victory for the subscribers who would have borne the brunt of the tax. He said: “The news of the suspension is well received. It shows that the government is listening to the complaints of the people and is always ready to do everything to increase penetration.

“If the tax remained, the burden will be passed on to the subscribers and that would have put untold hardship on them. It is actually a victory for them. I want the government to listen more and take decisions that will improve our quest to be a digital economy. More of these types of decisions will show Nigeria is ready to use ICT to build the economy” he added.

Why FG Should Support Telecom Sector

Pantami recalled several positive developments in the sector that needs to be sustained through support of the government.  “Three unprecedented positive developments have occurred in the digital economy sector in the last three years. In the last quarter of 2020, ICT alone, without including digital services, contributed 14.70 per cent to the GDP.

“In the second quarter of 2021, we saw another record where the sector contributed 17.90 per cent to the GDP. The last record was in the second quarter of 2022 where ICT contributed 18.44 per cent to GDP. By implication, this sector has been contributing a lot to the economy,”, he said.

The Minister also reminded that “the 5G Spectrum Auction conducted by the NCC in December 2021, contributed $547 million. This is in addition to billions of naira in spectrum and other fees remitted to the Federal Government’s coffers by the Commission.”

Executive Vice Chairman of the NCC, Prof Danbatta, in his remarks, commended the Minister for the leadership and direction for the industry. “The Minister has been leading from the front, including this effort to ensure this meeting takes place. Accordingly, we will do our best to get the best out of this assignment to the benefit of Nigerian citizens.”