The Nigerian Communications Commission (NCC) has advocated for a complete exemption of the telecom industry from paying excise duty due to the non-luxury nature of its services. Prof. Umar Danbatta, the Executive Vice Chairman of the NCC, made this statement during the Telecom Executives and Regulators Forum (TERF) organized by the Association of Telecommunications Companies of Nigeria (ATCON).
Danbatta commended the recent suspension of the 5% excise duty on telecommunication services but stressed the industry’s need for total exemption. He mentioned ongoing discussions with the Minister of Communications, Innovation, and Digital Economy, Bosun Tijani to address the industry’s tax concerns and ensure telecom’s exclusion from excise duties.
Danbatta also highlighted the alarming increase in the number of taxes paid by operators, rising from 41 last year to 46 in the second quarter of this year.
Highlights of the TERF
In discussing the regulatory actions taken to address industry issues, Danbatta, at the telecom executives’ gathering, highlighted the following key points:
- Initially, when the government proposed a 5% excise duty on telecommunication services, the industry faced a burden of 41 different levies, taxes, and charges. This number has now increased to 46.
- The exemption from excise duty was approved by the former President, Muhammadu Buhari, but it was a surprise when this duty reappeared in the Finance Act amended by the National Assembly.
- Danbatta commended President Tinubu’s decision to suspend the payment of excise duty. However, he emphasized the necessity of not just suspending but completely exempting the industry from excise duty since such duties typically apply to luxury items, which they do not provide.
- Telecommunication services have become an integral part of the lives of more than 220 million Nigerians and cannot be considered a luxury.
- Implementing the planned 5% excise duty would have placed the burden on millions of subscribers, potentially making these essential services unaffordable for many.
- The NCC is pleased with the suspension but is actively engaging with the minister to advocate for a complete exemption of the sector from this duty.
Speaking of the TERF, Mr. Tony Emoekpere, the President of ATCON, stated that the primary goal of the Forum was to create a distinct platform for influential industry regulators to deliver keynote speeches on vital telecom sector matters.
He also emphasized that multiple taxation is a significant obstacle that the industry is currently grappling with. Emoekpere noted that resolving these challenges would serve as a magnet for increased investments in the sector, ultimately driving its expansion.
How multiple taxation is crippling the Nigerian telecom industry
- Increased Costs: Multiple taxation leads to higher operating costs for telecom companies. They must allocate a significant portion of their revenue to pay various taxes and levies, which can reduce their profitability and financial resources for network expansion and improvement.
- Reduced Investment: High taxation discourages investment in the sector. Operators may be reluctant to expand their networks or invest in advanced technologies if a substantial portion of their income is spent on taxes.
- Reduced Innovation: Excessive taxation can limit funds available for research and development, stifling innovation in the industry. This could slow down the introduction of new services and technologies, ultimately affecting the quality of services.
- Increased Consumer Costs: Telecom companies may pass on the tax burden to consumers through higher tariffs and fees. This can result in higher costs for individuals and businesses using the services, potentially reducing their affordability.
- Negative Impact on Broadband Access: Multiple taxes can hinder the rollout of broadband infrastructure in underserved or rural areas. This can limit access to high-speed internet services, negatively affecting economic development and digital inclusion efforts.
- Discouragement of Foreign Investment: High levels of taxation can deter foreign investors from entering the Nigerian telecom market or acquiring existing companies. This may limit competition and innovation in the industry.
- Compliance Challenges: Multiple taxes can create complexity and administrative burdens for operators, leading to challenges in complying with tax regulations and increasing the likelihood of disputes with tax authorities.
- Economic Impact: The Telecoms industry plays a crucial role in economic development, job creation, and revenue generation. Excessive taxation can hinder these contributions and impact the overall economy.
- Uncertainty: Frequent changes in tax policies and multiple tax authorities can create uncertainty for companies, making long-term planning and investment decisions more challenging.
To address these issues, regulatory bodies like the Nigerian Communications Commission (NCC) often advocate for a fair and reasonable tax regime that balances the need for government revenue with the industry’s growth and sustainability.
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