Key highlights
- President Buhari has approved the exemption of telecoms from paying the recently introduced 5% excise duty on all services.
- A committee set up by the Presidency provided justifications for telecoms to be exempted.
- One of the justifications is that the telecoms sector is already overburdened with over 41 different taxes.
The Federal Government has announced the exemption of telecom services from the payment of 5% excise duty as stipulated in the Finance Bill 2022.
The government said the exemption was in line with the recommendations of the Committee it constituted to review the applicability of the Duty to the telecom sector which is considered already overburdened with taxation and sundry levies.
Minister of Communications and Digital Economy, Prof. Isa Ali Ibrahim Pantami, disclosed this on Tuesday at a press briefing organized to provide updates on the issue.
Pantami, who is the Chairman of the Committee, specifically set up for the purpose of reviewing the proposed excise duty in the telecom sector, said the Committee had carried out its national assignment and accordingly submitted its report to the President, justifying why the sector should be exempted.
Justifications for exemption
The Minister said the Committee’s submissions can be summed up in three arguments put forward to justify why additional burden in form of taxes or any level should not be imposed on the telecom sector to prevent a reversal of the important contribution the sector is making to the growth of the Nigerian economy.
- “Our justifications are based on three premises: First, is the fact that operators in the telecoms sub-sector of the digital economy industry currently pay no fewer than 41 different categories of taxes, levies, and charges; secondly, that telecoms have continued to be a major contributor to the Nigerian economy in terms of Gross Domestic Product Contribution (GDP).
- “The third ground for contesting the Excise Duty in the telecom sector is the fact that, despite the increase in the cost of all factors of production across the sector, and naturally leading to increase in costs of products and services, telecom sector is the only sector where the cost of service has been stable and in many cases continued to go down over the past years and therefore, adding more burden will destroy the sector,” the Minister said.
The Minister also informed the gathering that the President, having looked into the arguments put forward by the Committee and relying on the provision of Section 5 of the Nigerian 1999 Constitution, as amended, has therefore, exempted the telecom sector from the list of sectors to pay the excise duty as stated in Finance Act of 2021 and other subsidiary legislations, all of which are not as superior as the Constitution which permits the President to grant such waiver.
- “I am happy to report to you that President Muhammadu Buhari, GCFR, has approved the exemption of the digital economy sector from the five percent excise duty to be paid and this is because of the strength of the argument presented to him by the Committee that additional burden on telecom sector will increase the sufferings of Nigerians and that other sectors that are not making as much contribution to the economy should be challenged to do more and pay the 5 percent excise duty,” he said.
Pantami had in August last year objected to the applicability of the 5% excise duty to the telecom sector. This prompted President Muhammadu Buhari to suspend its application to the telecom services and set up a Presidential Review Committee on Excise Duty in the Digital Economy Sector.
Why it matters
The implementation of the 5% excise duty in telecoms would have led to a 5% increase in the cost of all telecom services including calls and data as the service providers were to pass the tax to their customers.
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