• Thu. Feb 2nd, 2023

Imposing 5% Excise Duty on Telecom Services Will Negate NCC’s Consumer Campaigns, Broadband Plan

ByJustice Godfrey Okamgba

Aug 19, 2022
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Read Time:8 Minute, 39 Second

The global economy is in ‘desperate times’. That is the fact. In fact, the global growth is expected to slump from 5.7 percent in 2021 to 2.9 percent in 2022.

In that line, Nigeria faces, perhaps, its worst economic situation in recent times as reports by the National Bureau of Statistics indicate that the country’s urban inflation increased by 2.08% to 20.09% in July 2022 from 18.01% in July 2021.

In that light one may be persuaded to agree with the Zainab Ahmed, Minister of Finance, Budget and National Planning that the the proposed move to impose a 5 per cent excise duty on telecom services (calls, SMS, and data) is justified.

But, another school of thought shows the 5% Excise Duty on Telecom Services tilts more to consumer economy; an economy driven by consumer spending as a percent of its gross domestic product, as opposed to the other major components of GDP (gross private domestic investment, government spending, and imports netted against exports).

Therefore, taxing the consumers more through telecom services negates whatever good intentions the Minister may have as demonstrated in this article.

This has generated a bucket of concerns in the ICT industry too.

Zainab Ahmed, Minister of Finance, Budget and National Planning
Zainab Ahmed, Minister of Finance, Budget and National Planning

Zainab Ah​​med who heads the Finance Ministry, on different occasions had urged ICT stakeholders to support the implementation of the 5 per cent exercise duty as the country’s revenue can no longer take care of its needs.

Understandably, with the worsening economic challenges faced by Africa’s largest economy, the government is scavenging for a lifeline that will savage the situation.

However, the fiscal move is against the commitment of the Nigeria Communications Commission (NCC) to protecting the interests of consumers and ensuring the long-term growth and sustainability of the telecom sector.

Professor Isa Pantami, Minister of Communications and Digital Economy
Professor Isa Pantami, Minister of Communications and Digital Economy

Similarly, Professor Isa Pantami, Minister of Communications and Digital Economy, has kicked against the proposal even though the Minister was yet to be (officially) informed: “I have not been officially informed about it and we at the Ministry are not satisfied with any effort to introduce excise duty on telecommunications.”

“We will definitely challenge the decision,” Pantami said at the maiden edition of the Nigerian Telecommunications Indigenous Content Expo (NTICE), organized by the Nigerian Communications Commission in Lagos, on August 1, 2022.

The Minister’s position on the proposed excise duty on telecom services is sacrosanct to his quest for cost-effect charges to the consumers. In April 2020 he ordered the telcos to cut data, SMS and voice call tariffs.

He understands that the consumer deserves better, which is also a concern to the Nigerian Communications Commission (NCC) led by Professor Umar Garba Danbatta, the Executive Vice Chairman.

NCC’s Consumer-Centric Campaign will be eroded

Aside from aligning with the Ministry of Communications and Digital Economy to reject the 5 percent tax on telecom services, the NCC has been consistently playing the advocacy role for consumers.

Conspicuously, the NCC over the years has rolled out different initiatives, organizing different fora to educate, sensitize, and bring together telecom consumers in the urban, semi-urben and rural areas with network providers to discuss, and proffer solutions to consumer-related issues and ensure they have value for money through effective service delivery.

NCC, Airtel Licence, local investment
Prof. Umar Danbatta, EVC of NCC

In the last two decades, the industry regulator has shown itself as a consumer-oriented regulator by deploying various regulatory frameworks and initiatives to ensure a consistent reduction in the cost of telecommunications services in the country.

NCC dedicated the whole of 2017 as the Year of Telecom Consumer; with a campaign programme designed to give concrete expression to the centrality of the consumer in the telecom ecosystem.

Deriving life from items 2 and 6 of the NCC Management’s 8-point Agenda launched February 27 2016, the declaration of year 2017 focused on the needs and satisfaction of the Nigerian telecom consumer.

Since then, the Prof. Danbatta led telecom regulator has maintained solidarity with the consumer on matters of tariffs and matters like Quality of Service (QoS) and other complaints. On the telecom operators’ side, NCC has also waded into matters regarding Right of Way, State Governments shutting down base transmitter stations, multiple taxations, protection of critical telecom infrastructure. We are not saying it is yet uhuru in the Nigerian telecom sector, but if other regulators were NCC, probably the country wouldn’t have found itself in the current economic state.

An attestation to this is the comment credited to Professor Umar Danbatta at the recent Stakeholders Forum’ organized by the NCC on the ‘Implementation of Excise Duty on all Telecommunications Services’ held on Thursday, July 28 in Abuja:

“As the telecoms industry regulator, the Nigerian Communications Commission has engaged with the Federal Ministry of Finance, the Nigerian Customs Service, and consultants from the World Bank to get needed clarifications.”

NCC, 5% Excise Duty on Telecom services
Telecom Mast

“These engagements enabled us to better understand the objectives and proposed implementation mechanisms of the Excise Duty.” This simply means NCC has not given a nod in agreement to the proposed tax on telecom services; therefore, it is not party to the 5% excise duty.

“Nonetheless, we consider it imperative that these implementing agencies should also meet directly with telecom industry stakeholders to address areas of concern,” he stated.

Has the telecom regulator’s advice been implemented?

The NCC has been doing its part to beat tariffs down and to promote universal access to all areas where broadband and other telecommunications services are available, accessible, and affordable and where consumers derive value for the money spent on telecommunications services.

A few months ago (May), the Association of Licensed Telecommunication Operators of Nigeria (ALTON) wrote to the Nigerian Communications Commission (NCC) to approve a 40 percent increase in the cost of calls, SMS, and data.

Mobile operators wanted the sector to undergo periodic cost adjustments through the NCC’s intervention in order to minimize the impact of the challenging economy.

However, the NCC tactically stopped the proposed increment by ALTON for the sake of the consumer, saying that any such decision must be fair to the subscribers and engender healthy competition among service providers.

For the avoidance of any doubt, and contrary to MNOs’ agitation to increase tariffs for voice and Short Messaging Services (SMS) by a certain percentage, the Commission categorically informed telecoms subscribers and allay the fears of Nigerians that no tariff increase will be affected by the operators without due regulatory approval by the Commission. Will the government now stab NCC in the back?

Nigeria active telephony subscription
Telecom consumer

It is noteworthy that tariff regulations and determinations are made by the Commission in line with the provisions of Sections 4, 90, and 92 of the Nigerian Communications Act (NCA) 2003, which entrusts the Commission with the protection and promotion of the interests of subscribers against unfair practices, including but not limited to; matters relating to tariffs and charges. Therefore, the Minister of Finance has a duty to work with NCC on this instead of issuing statements that sound as if it were a sealed-deal.

Multiple Taxations

Over the years, the NCC has been on the front burner in developing an engagement template to deal with issues of multiple taxation faced by the operators; urging the Nigerian government not to see the sector as a money spinner.

ALTON, 5G, identity management
Gbenga Adebayo, ALTON chairman

The proposed 5% excise duty on telecom services by the Federal Government is coming again, together with the other more than 42 taxes paid by telecom operators.

Operators have frowned at the proposal, saying they won’t be able to subsidize the tax on behalf of subscribers in addition to the 7.5 percent VAT, making it 12.5 percent payable by subscribers to the Federal Government.

From all indications, multiple-taxation is chief among reasons telecom investors’ now foot-drag in pushing more capital into broadband infrastructure, which affects the quality of service and other indices.

Nigeria National Broadband Plan 2020-2025 at Risk

Telecom is the only sub-sector where cost of getting services has been going down since liberalisation of the sector despite rising cost of operations incurred by the operators. This is linked to effective regulations of the sector where NCC ensures robust and healthy competition among the licensees.

The effective regulatory efforts resulted in NCC ensuring that the cost of making calls has crashed from around N70 per a minute call in 2021 to around N20 per minute presently.

Therefore, if the Ministry of Finance, Budget and National Planning should make true its ‘threat’ to implement the 5% Excise Duty on telecom services, then, NCC’s efforts towards a crash in price of data would have been futile.

Invariably, the Nigeria National Broadband Plan 2020-2025 (with a target to achieve 70% broadband penetration) would be at risk. The reasons are obvious. NCC plans to crash the cost of data to N390 per gigabyte by 2025, as contained in the NNBP; so any additional tax on the telecom operators implies that the cost of call, data and SMS would go up. There is nothing NCC can do about it at that stage.

5G and other telecom infrastructure will slow down too

Nigeria is gearing up towards the launch of the fifth generation (5G) technology. 5G comes with enormous benefits. 5G is a game-change for Nigeria’s economy. But if we fail to overcome the elementary issues like ensuring Ease-of-Doing-Business for industries like telecommunications, then, it means the government is not encouraging investors.

And to think that the Finance Minister would think about imposing fresh taxes on telecom services less than three months after President Muhammadu Buhari inaugurated 27-man Council on Digital Economy who are tasked to improve Nigeria’s ranking on Ease of Doing Business, seriously leaves a sour taste in the mouth.

Conclusively, the Ministry of Finance should help NCC to maintain its regulatory excellence. A wrong step/decision taken by the government can stall the progress of this industry with greater risks to the economy. Taxing the telecom operators to death because the industry, is seemingly booming, will boomerang as we would have eaten the seeds meant for the next farming season.

May the Digital Economy Agenda not be in vain!

AIT
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