The legislature is currently considering the Communications Service Tax (CST) bill which seeks to increase Communications Service Tax (CST) from five percent to nine percent for all services, including voice calls, SMS, MMS, data services and Pay per View Television stations. Here is how this proposed tax increase is likely to affect telecom subscribers and companies.
For one, industry experts agree that the proposed tax increase will lead to a corresponding increase in the rates currently being charged by telecom operators for their services. Mrs. Nike Akande, the President of LCCI, noted the current ‘business environment’ implied that any tax increase would be hard to bear by the companies without their having to increase tariffs. Current high costs of doing business in Nigeria would also mean that a tax increase would not favor telecom companies.
The President of the Association of Telecoms Companies of Nigeria (ALTON), Mr. Teniola Olusola also said that telecom companies are already suffering from multiple taxation and as such any further increase will bode negatively on them.
How about telecom users? In an effort to retain profitability, the proposed increase in VAT would imply higher charges for telecom subscribers. Speaking on how this increase may affect telecom subscribers, Mr. Bimbo Atilola who is the Chairman of the LCCI Taxation and Commercial Law Committee said that consumer behavior is likely to change negatively to an increase in tariffs through reduced spending. Mr. Teniola Olusola also asserted that the proposed increase would likely reduce subscribers’ levels of data consumption.
What the above will imply is that the supposed additional revenue that the FG expects to achieve from the proposed increase will not be achieved, while consumption levels would also decline. Expressing this view, Mr Taiwo Oyedele, who is a partner at PriceWaterCoopers said that the estimated N20 billion projected revenue from the bill was unrealistic as it was based on assumptions of current service utilization. Any increase would reduce this utilization and thus reduce the projected revenue. He noted that the increase will also deter investors in the sector and further reduce revenue.
The above views were all expressed during the recent stakeholders meeting organized by the Lagos State Chamber of Commerce and Industry (LCCI).
News Team/Vanguard Newspapers