NIGERIA’S PLANNED TAX ON AIRTIME RECHARGE TO WIDEN UNAFFORDABILITY OF TELECOM SERVICES

 In Investor News

Two years after public criticism forced a 9 percent communication tax bill to be stepped down, the Nigerian government is back on another tax mission for the telecommunications sector. This time, the government is calling it ‘excise tax’ on telecoms airtime charges.

From 2020, the Finance Act allows the government to impose a 5 percent excise tax on every telecommunication equipment manufactured and imported into the country. It is possible the government may be planning to include a fresh 5 percent on all airtime recharges that Nigerians make which would mean paying an extra N5 for every N100 or N50 for every N1000 recharge made.

At a recent World Bank event, Ben Akabueze, Director-General of the Budget Office of the Federation, said that the government last year found that Nigeria was lagging behind most of Africa in implementing the excise tax on the sector. However, current realities in which it desperately needs to raise additional revenues may make imposing the tax an inevitability. “Last year, we found that 51 countries in Africa have excise on airtime charges, so we are looking at that as well as an area (to tax),” said Ben Akabueze.

Already the industry pays close to 21 different taxes, according to some stakeholders, including Right of Charges, National Information Technology Development Fund Levy (NITDEF), National Cybersecurity Fund, Annual Operating Levy in addition to existing statutory taxes like Companies Income Tax, Tertiary Education Tax, Value Added Tax, etc. Another tax will add to the tax burden the industry is already saddled with. Besides, the use of the term ‘excise tax” does not sit well with some operators in telecommunications.

“It is not clear to telecom operators why the federal government wants to introduce an excise tax on telecoms airtime recharge,” Gbenga Adebayo, President of Association of Licensed Telecommunication Operators of Nigeria (ALTON) said. “Excise duty is introduced in manufacturing goods and it is introduced when the government wants to reduce the intake of such manufactured products. Except the government wants to discourage importation of recharge cards into Nigeria in order to encourage telecoms operators to use alternative means of vending airtime, like the virtual top-up that does not need a physical recharge card.”

Excise taxes are internal taxes that are levied on sale of specific goods and services, such as alcohol, fuel, and tobacco – often goods the government wants to discourage the use of. It is an indirect tax that is not paid by the customers directly – instead, the excise tax is imposed on the supplier or the producer, who then includes it in the product price.

The inclusion of telecommunication services provided in Nigeria is the most recent change to the excise duty regime in the country. In the case of airtime recharge, the government would impose it on the network operators which will in turn pass it on the subscribers.

Read more at: https://businessday.ng/technology/article/nigerias-planned-tax-on-airtime-recharge-to-widen-unaffordability-of-telecom-services/?login=success

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