Nigerian Government plans new 5% tax for GSM Calls, SMS and data usage

Tax on telecommunication services is set to increase to 12.5% as the Federal Government plans to implement a 5% inclusive excise duty on telecommunications services in Nigeria.

This was made known by the Minister of Finance Budget and National Planning, Zainab Ahmed, at a stakeholders’ forum on the implementation of excise duty on telecommunications services in Nigeria which was held on Thursday in Abuja.

Ahmed, who was represented by the Assistant Chief Officer of the Ministry, Mr Frank Oshanipin, at the event organized by the Nigeria Communication Commission (NCC), said the 5% excise duty had been in the finance Act: 2020 but was not implemented.

What the Minister is saying

Zainab Ahmed said the delay in its implementation was a result of government engagement with stakeholders.

• She said, “Payments are to be made on monthly basis, on or before 21st of every month.
• “The duty rate was not captured in the Act because it is the responsibility of the President to fix rate on excise duties and he has fixed five per cent for telecommunication services which include GSM.
• “It is public knowledge that our revenue cannot run our financial obligations, so we are to shift our attention to non-oil revenue.
• “The responsibility of generating revenue to run government lies with us all.’’

Consumers to bear the burden of new tax 

The Chairman, Association of Licensed Telecom Owners of Nigeria (ALTON), Gbenga Adebayo said the additional 5% tax would be passed on to telecommunications consumers who will bear the burden.

He said, “It means that subscribers will now pay 12.5 per cent tax on telecom services, we will not be able to subsidise the five per cent excise duty on telecom services.

“This is as a result of the 39 multiple taxes we already paying coupled with the epileptic power situation as we spend so much on diesel.’’

The Executive Secretary of ALTON, Mr Gbolahan Awonuga, said the 5% excise duty was not healthy for the industry, noting that the telecom service providers were already paying 2% of their annual revenue to the NCC.

He said, “We pay two per cent excise duty to NCC from our revenue, 7.5 per cent VAT and other 39 taxes. We are going to pass it to the subscribers because we cannot subsidise it.’’

What you should know

• Recall that it was reported earlier in May that President Muhammadu Buhari approved the collection of 5% as excise duty on telephone recharge cards and vouchers.
• The charge is part of new items on the list of goods liable for excise duty on the Finance Act in the country.
• Excise duty is a levy charged at the time of manufacturing. It is also a form of indirect tax on the sale or consumption of certain goods, products, services or activities such as tobacco, alcohol, narcotics, gambling etc., mainly to discourage their use and consumption. Nigeria’s Finance Act has extended the list to include beverages, non-alcoholic drinks etc.
• According to reports, the Federal Government is expected to raise at least N150 billion from the duty as the collection was part of new items on the 2020 Finance Act signed by President Buhari.