FG cancels proposed 5% excise duty on telecom service operators

The Federal Government of Nigeria has announced the removal of the planned 5% excise duty for the telecom sub-sector of Nigeria’s Digital Economy Industry in line with the recommendations of the Presidential Review Committee it had constituted to review the applicability of the Duty to the telecom sector which is considered already overburdened with taxation and sundry levies.

Prof. Isa Ali Pantami, the Minister of Communications and Digital Economy, stated that this was a part of the government’s commitment to reviewing the amount of taxes that operators in the telecom business are subject to. The decision was disclosed at a press briefing to provide updates on the status of the 5% excise duty yesterday.

The applicability of the excise duty charge in the telecom sector was objected to by the Minister in August 2022, after which President Muhammadu Buhari suspended its application to the telecom sector and set up a Presidential Review Committee on Excise Duty in the Digital Economy Sector.

Pantami, the Chairman of the Committee, specifically set up to review the proposed excise duty, said the Committee had carried out its national assignment and accordingly submitted its report to the President, justifying why the sector should be exempted.

The Minister said the Committee’s submissions could be summed up in three arguments put forward to justify why additional burden in form of taxes or any level should not be imposed on the telecom sector to prevent a reversal of the important contribution the sector is making to the growth of the Nigerian economy.

“Our justifications are based on three premises: First, is the fact that operators in the telecoms sub-sector of the digital economy industry currently pay no fewer than 41 different categories of taxes, levies and charges; secondly, that telecoms have continued to be a major contributor to the Nigerian economy in terms of Gross Domestic Product Contribution (GDP).”

Prof. Isa Alli Pantami

“The third ground for contesting the Excise Duty in the telecom sector is the fact that, despite the increase in the cost of all factors of production across the sector, and naturally leading to increase in costs of products and services, the telecom sector is the only sector where the cost of service has been stable and in many cases continued to go down over the past years and therefore, adding more burden will destroy the sector,” the Minister said.

The Minister also informed the gathering that the President, having looked into the arguments put forward by the Committee and relying on the provision of Section 5 of the Nigerian 1999 Constitution, as amended, has, therefore, exempted the telecom sector from the list of sectors to pay the excise duty as stated in Finance Act of 2021 and other subsidiary legislations, all of which are not as superior as the Constitution which permits the President to grant such waiver.

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More on the 5% excise duty removal

The Federal Government announced intentions to impose a 5% excise duty tax on telecom services in July 2022 in an effort to boost its revenue sources. Zainab Ahmed, the minister of finance, budget, and national planning, had announced Mr. Frank Oshanipin, the assistant chief officer of the ministry.

She said, “The duty rate was not captured in the Act because it is the responsibility of the President to fix rates 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.”

At the time, telecom companies stated that telecom consumers would pay the tax, increasing consumption tax on telecom services to 12.5 per cent. The government later suspended the implementation of the tax and set up a committee to review it.

To counter this, telecommunication consumers under the aegis of the National Association of Telecoms Subscribers sued the Federal Government in court.

Prof. Pantami expressed his excitement at the decision made by President Muhammadu Buhari, which he claims was due to the strong reasons put forward by the committee which he chaired.

“I am happy to report to you that President Muhammadu Buhari, GCFR, has approved the exemption of the digital economy sector from the 5% excise duty to be paid and this is because of the strength of the argument presented to him by the Committee that additional burden on telecom sector will increase the sufferings of Nigerians and that other sectors that are not making as much contribution to the economy should be challenged to do more and pay the 5 per cent excise duty.”

The Minister assured Nigerians, who are telecom consumers, that the incoming administration shall sustain the presidential exemption given to the telecom sector as “the decision by the President is not about any political party or any administration but about Nigeria and welfare of Nigerian citizens.”

The Minister further noted that the Digital Economy Sector has continued to contribute significantly to the growth of the Nigerian economy, having contributed 14.07 per cent to the GDP in the first quarter of 2020, 17.79 per cent in the second quarter of 2021, and 18.44 per cent in the second quarter of 2022.

Despite the rise in operating costs, including the energy challenge that has forced mobile network operators to power base stations with over 32,000 power generating to provide seamless services to their teeming consumers, he claimed that the sector has also increased its quarterly revenue generation for the government from N51 billion to over N480 billion, representing a growth of 594%.

He also claimed that the cost of buying data has decreased from N1,200 in 2019 to N350.