Nigeria’s Minister claims 9% tax ‘to deepen broadband by 30% in 2018’
Barrister Adebayo Shittu, Minister of Communications has claimed that the 9% Communication Service Tax bill (CST) expected to be passed into law by the National Assembly will let Nigeria achieve 30% broadband penetration by 2018.
The National Broadband Plan was formulated by Dr Omobola Johnson, former Minister of Communication Technology as a broad roadmap for ubiquitous broadband access across Nigeria.
Meanwhile the current Minister of Communications believes that there is need to incentivize citizens to contribute towards the achievement of the 30% broadband target of the National Broadband Plan and mandate also set by the International Telecommunication Union (ITU).
“The ITU gave Nigeria the mandate to achieve 30% broadband penetration by 2018. This is only two years away. In spite of the huge investment by government and industry operators, Nigeria has achieved only 10% broadband penetration at the moment. If we are to catch up with lost ground and meet up with the expectations of the global community in the area of affordable broadband service, we have to incentivize the populace by helping to aid access to low cost data service subscription,” the Minister tells participants at the Communication Service Tax Stakeholders’ Meeting organised Wednesday by the Lagos Chamber of Commerce and Industry (LCCI) in Lagos.
“Others have posited that over 60 million Nigerians would be unable to afford basic broadband connection, a situation that is likely to threaten Nigeria’s ability to achieve its goal of 30% broadband penetration by 2018 and also undermine the socio-economic progress spurred by increase connectivity. They opined that this to a large extent, will be a cog in the wheel of implementing the National Broadband plan,” he adds.
The event organized by the Lagos Chamber of Commerce and Industry (LCCI) reviewed the National Assembly’s plan to pass the Communication Tax Bill titled ‘Communication Service Tax (CST) 2015‘ into law.
The Bill proposes that the tax will be charged at 9% on service fees payable by users of electronic communication services and will be borne by the customers. Both the Senate and the House of Representatives have commenced the legislative process to enact the bill which has now passed its first reading.
The 9% communication tax, when implemented, will be huge sources of revenue for the government, which will enable it fund the budget deficits, the Communications Minister claims.
[quote font=”georgia” font_size=”22″ font_style=”italic” align=”left” arrow=”yes”]The Bill proposes that the tax will be charged at 9% on service fees payable by users of electronic communication services and will be borne by the customers. Both the Senate and the House of Representatives have commenced the legislative process to enact the bill which has now passed its first reading.[/quote]“Our appetite as a government to increase revenue makes this bill worthy of our consideration as I have been reliably informed that the projected earnings from this effort is over N20 billion every month, which is an attraction to the government in funding our budget deficits. I must be quick to say that this government has got a human face twined around its decisions,” according to Shittu.
While stating that his focus on any tax regime is to align any process that will stimulate the economy, Shittu says he will “also ensure that the tax system is efficient by widening the tax net and creating an effective framework for tax compliance to protect the poor and vulnerable in the society who nonetheless have to use telecom services.”
According to the Minister, “the introduction of new taxes without harmonizing existing ones will put pressure on the Nigerian tax system, making it unattractive to investors. This may also be counter-productive in the long run for our targets on broadband penetration.
“Many schools of thought have extrapolated that the bill seeks to impose additional charges on users of electronic communication services in Nigeria; that tax will be charged at the rate of 9% of the fee payable for the service and will be borne by the customers. More so, that the extra tax will be applied on voice calls, SMS, MMS, Data and Pay TV viewing, among other services; that communication service providers will collect this tax from the subscribers and remit to the Federal Inland Revenue Service on a monthly basis.”
The Nigerian Communications Minister admits that “many have said that this bill is discriminatory because it targets only the communication industry to the exclusion of other sectors of the economy. They reckon that rather than over tax an already overburdened industry and its populace, government needs to stimulate the economy and encourage the adoption of communication service by all – whether rich or poor. They suggest that government’s focus should be to expand the tax base to include taxable people and sectors that are currently not included and those that are evading tax.
“Additionally, many have also concluded that the proposed bill will also discourage further investment in the communication industry due to reduced returns on investment, and ultimately drastically reduce the sectors huge contributions to the national GDP. Some have concluded that the proposed CST bill is an ill wind that would blow the country no good,” Shittu adds.
The Minister also adds that his reason for being present at the forum was to gather responses on the Bill by the public and advise the president on the way forward.
“I therefore wish to consult extensively, painstakingly and consistently on the present issue of the communication service tax bill and advise Mr. President on the voice of the people as well as the right and best global practice. That is why I chose personally to be here today as I need to get first hand informed opinions from the relevant stakeholders,” he tells the forum attendees.
He also drums up support for the Bill which he claims will enable higher broadband penetration and in turn boost the GDP of the country’s economy as well as make government and governance smart.
“I enjoin this forum to come up with ways to make this bill work by dispassionately considering a harmonized position of those for and against the bill. For Nigeria to be part of the 21st century knowledge economy there is a need to leverage the potentials of broadband. Economists have extrapolated that the contributions of broadband to Gross Domestic Product would increase considerably and that’s why we refuse to leave any stone unturned on the broadband plan for the country”, Shittu says.
According to him, “it is my hope that the outcomes, awareness created and submissions emanating from this meeting will provide the foundation for an all-inclusive procedural roadmap for achieving the bill, or otherwise for the sector. We will need your support as we strive to make the government and governance SMART, a government where all will have ubiquitous access to ICT services in the country.
“There is no doubt in my mind that on communication service bill will further offer a platform for mutual understanding on the bill. It will also give a veritable opportunity for government and private sector operators to compare notes that would boost the broadband penetration in Nigeria and create more jobs,” he adds.
In his submission Engineer Gbenga Adebayo, National Chairman of the Association of Licensed Telecommunications Operators of Nigeria (ALTON), says the bill will not only be detrimental to the telecom industry, but also to the poor masses who benefit from telecom services.
According to the ALTON chief, “the industry faces today not less than 26 taxes and levies, including governments of states taxing operators whose infrastructures are in the forest land. So the ridicule there is, if we are paying so much to government to implement infrastructure, services are provided for the people. There are people whose own budget in a month is N200, there are people whose own budget in a month is N500. If you now take 9% of that as tax, 200 minus 9%, you know what it means; this will affect the lives of the average people. So I think we should have a rethink on this Bill, we should have a rethink.”
According to him, the telecoms sector already spend so much money on electricity power bills and diesel while also noting that the tax Bill is adding more expenditure to the sector in addition to its other taxes and expenditures.
Adebayo notes that “in the days of NITEL, NITEL gets budget and extra budgetary allocation because when the money is finished on diesel and NEPA bill, they go back to government, write a motivation to get extra-budgetary allocation year-in year-out.
“We know today how much money is being spent on power generation. But this is an industry that has been developed by people with private money, with private investment, and it is what it is today. I think it is therefore wrong to begin to point to the arrows at the operators, because we are not an extractive industry.”
He says that “today, Telecom is the most functional public infrastructure that we have. The fact is that some of us know that before we go to bed the phone is the last thing we consult. When we wake for toilet break at night, the phone is what we look at and when we wake in the morning before we remember to say our morning prayers, the phone is what we wake to. So we cannot say more than that that telecoms is the most important part of our daily lives today. Both for our economy and for our personal life. And if we compare with our other entire public infrastructure, which is most functional?
“We provide social services which today are the most functional of what we have, and I therefore think that we should have an exemption from things such as this,” he adds.
”In my opinion, the communication service tax bill is not consistent with the national broadband plan”, the ALTON Chairman says noting that he has studied the two to find them “completely different.”
[quote font=”georgia” font_size=”22″ font_style=”italic” align=”left” arrow=”yes”]“According to what is said, there are only 10 million people paying tax, and we are almost 200 million people. So maybe the work to do is to find more people to join that 10 million and let’s do the work that about 50 million people would be paying taxes, then telecoms will be in the back burner, we wouldn’t be in the front burner,” he says.[/quote]According to him, “I have been privileged to see the national broadband plan and lucky to be serving on the committee that is implementing that bill. I can say to all of us here present that the spirit of the broadband bill and the spirit of this present tax bill, is like something coming from the north and the other going from the south, they are completely different.”
The ALTON Chairman recommends that the Federal Government should give attention to expanding the number of those paying tax rather than focusing on the telecoms industry to provide the tax fund supposed to be raise alongside other sectors of the economy.
“According to what is said, there are only 10 million people paying tax, and we are almost 200 million people. So maybe the work to do is to find more people to join that 10 million and let’s do the work that about 50 million people would be paying taxes, then telecoms will be in the back burner, we wouldn’t be in the front burner,” he says.
The ALTON president says ”we should give the right information to the presidency so that they would understand the challenges that we face before we sign in to something that will retard the pace of progress.”
He assured that people would pay tax when they see the value of it and see the money being put to proper use.
“When people see the benefits of paying tax, they would pay tax, but when every day we here that more money has been stolen from the tax that we have paid, many people would be reluctant to paying more. So if people don’t get value for the taxes that they pay, we would have problem of people not complying with the tax,” he adds.