ALTON Advises Nigeria against Introducing Communications Tax

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Gbenga Adebayo, president, ALTON

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The Association of Licensed Telecommunications Operators of Nigeria advises the federal government against introducing communications tax because it will further impoverish the masses who are already paying value added tax and hamper broadband development by telecom companies which are already overburdened by other multiple taxes

By Anayo Ezugwu  |  Sep 19, 2016 @ 01:00 GMT  |

THE Association of Licensed Telecommunications Operators of Nigeria, ALTON, has advised the federal government not to introduce the proposed communications tax because its administration will be cumbersome and impractical.

According to a statement signed by Gbolahan Awonuga, executive secretary of the Association, the introduction and collection of the tax without the exclusion of the applicability of the Value Added Tax, VAT, which was introduced by the VAT Act and is also applicable to services rendered by service providers in the telecommunication sector, will amount to double taxation. The proposed tax is an additional tax on communication services rendered to the same end users who already pay a five percent tax as VAT. “We must correct this general notion that service providers can absorb any tax without considering the capital and operational cost to the service providers.”

The statement noted that high consumer taxes on communication services would impact negatively on economic and broadband development. “Today, the country has more than 83 million unique subscribers, accounting for 45 per cent of the population as well as providing access to financial services, education and healthcare to millions of citizens, many for the first time. Telecom has also played a critical role in reducing transportation, communication and transaction costs.  Pushing up the cost to consumers, this tax will inevitably adversely impact the adoption of broadband affordability which is a key challenge in connecting the unconnected.

“In addition, the telecom ecosystem contributed US$8.3 billion in value add to the Nigerian economy in 2014 alone, and telecom operators supported the creation of 164,000 telecom growth is a fundamental part of the government’s Vision 2020 plan to consolidate Nigeria’s position as one of the 20 largest economies jobs . Such is its significance that driving in the world and a central element of President Buhari’s election manifestoes.”

It noted that the communication service taxes, on the contrary, will negatively impact consumer services and decline industry revenues. “The proposed tax will reduce the incentive for telecom operators to invest in the infrastructure improvements that are essential to improve and expand mobile/broadband connectivity across Nigeria. Telecom industry investment in Nigeria is already constrained by multiple taxations and may not have room to contain the tax.

There are 26 different taxes and fees levied on mobile operators and consumers, including national and local taxes on revenues, businesses and business sites as well as regulatory fees such as spectrum and permits fees. On the National Broadband Plan, ALTON said broadband penetration remains low at less than 10 percent with the government setting a target of 30 percent by 2018.

“There is more ground to cover as only less than 10% of telecom over 160 million subscribers can access broadband.  The Nigeria Broadband market opportunity is huge in terms of distribution and penetration.

“According to statistics from the ITU, despite the fact that Nigeria has 45 million Internet users, the highest online population in Africa, only nine percent or about 14.5 million are actually internet subscribers. Opportunity exists for over 100 million potential internet users. Internet-to-Home penetration is 4.6 percent while broadband penetration is at a mere 6 per cent. With a youthful population and growing middle class, the market holds great potential.”

It concluded that the introduction of the CST law without the harmonisation of other extant laws is likely to make the current government unpopular, as it will put pressure on the Nigerian tax system which will make it unattractive to investors and may also be counter-productive for targets on broadband penetration.

“Instead of laying untoward hardship and heavy burden on an already impoverished citizenry, what government should be doing is coming up with policies that stimulate the economy and put measures in place to ensure a more efficient tax system and framework for tax compliance. A good place to start will be to review and cut down the cost of governance at all levels. The sheer magnitude of the effect of this law cannot be imagined,” it said.

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