Tax on calls, SMS, data, others faces setback

Spread the love

THE proposed tax on voice calls, short messaging service, data services, and pay tv subscription is facing some resistance from experts, especially stakeholders in the telecom industry.

The Senate last week proposed the CST bill as a way for the Federal Government to plug the gap in revenue.

The telecommunications industry is crucial to the economy but faced with myriads of challenges from the ecosystem one of which is the multiple taxes operators have to pay.

Reports show that the three tiers of government – federal, state and local government – collectively impose over 40 levies and taxes on telecom operators.

While exploring opportunities for improving government revenue, the 9th National Assembly revisited a Communication Service Tax Bill that had been shelved two years ago.

The proposed bill sponsored by Senator Ndume Ali seeks to impose and collect communication services tax or levy on charges payable by consumers of electronic communication services such as voice calls, SMS, data usage and Pay per View TV stations at the rate of nine per cent.

The tax, which will be collected by the Federal Inland Revenue Service and remitted to the Federation Account, is to be paid together with the electronic communication service charge payable to the service provider by the user of the service.

The President, Association of Telecommunication Companies of Nigeria, Olusola Teniola, said the proposed nine per cent Communications Service Tax would amount to double taxation on voice, SMS and data service if the bill was allowed to scale through.

This, according to him, is because five per cent Value Added Tax have been paid on those services.

He said, “This represents an additional burden when applied to a subscriber base of 173 million. If the passage of this bill goes through, it would negatively impact Nigerians and foreigners that use these services. The implementation of this CST bill would take the affordability of data services out of the reach of the citizenry.”
Therefore, Teniola advised the government to reconsider the passing of the bill, as it would add to the burden of the already suffering Nigerians

He expressed the fear that an additional tax would lead to loss of revenue to the industry and loss of jobs in the sector.

According to the bill, all service providers are expected to file monthly returns not later than the last working day of the month immediately after the month to which the tax returns and payment relate.

Penalty stipulated by the CST bill for failure to file returns on or before the due date is N50,000 and an additional N10,000 for each day the returns are not submitted.

It stated that a service provider who refuses to provide access to its relevant network for government or its appointed agent commits an offence and is liable to a penalty of five per cent of annual gross revenue of the last audited financial statements.

If the situation persists after 90 days, the bill said Nigerian Communications Commission might be asked to revoke the operating licence of the service provider.

The Chairman of Association of Licensed Telecommunications Operators of Nigeria, Gbenga Adebayo, said the terms of the bill was likely to breach data privacy of Nigerians.

According to him, the bill was offensive to the industry because it would make communication expensive and inaccessible to Nigerians.

According to him, the bill was offensive to the industry because it would make communication expensive and inaccessible to Nigerians.

“The bill is badly intended for an industry at a time when we are talking about the availability and accessibility of telecom services. If that bill is allowed to go through, it will deny people access to these services and reduce the value of their recharge,” Adebayo added.

He said, “The terms of the bill, which we haven’t seen, may lead to significant compromise in people’s privacy because the way by which the collection of the money will be made may require the government to have access to the servers of the operators.”

He called on the senate to reconsider the proposed tax as it was contrary to the purpose for which they were elected into office.

Stating their perspectives, tax and regulatory analysts at Deloitte, Oluseye Arowolo and Yomi Olugbenro, shared Teniola’s sentiments saying the CST was a consumption tax, which would be in addition to value added tax that consumers of telecommunication services were already subjected to.

According to them, the proposed tax will reduce the purchasing power of consumers in the midst of rising prices and negatively impact investment climate in the economy.