By NWAKAEGO ALAJEMBA
The Association of Licensed Telecoms Operators of Nigeria (ALTON) has faulted the proposed (tele) communications service tax (CST), warning that should the proposal now only a bill becomes law, the country risks eroding all the gains it has made in the sector in the last 15 years.
“The CST is an imposition that will kill patronage, hamper creativity and deter investors,” ALTON, the umbrella body for all licensed providers of telecommunications and subsidiary services in Nigeria, warns in Lagos through an official statement on the CST.
The public became aware of the bill through a statement by the country’s Communication Minister, Barrister Adebayo Shittu at a recent function in Lagos. Since then, the industry has been inundated with fiery debates on the CST.
‘The CST will be levied on service fees payable by users of electronic communication services at 9% of the charge for the service and will be borne by the customers. If the Bill is enacted into law, it will mandate service providers to file monthly tax returns with the FIRS with strict penalties for non-compliance.
‘The categories of communication services liable to the tax include voice calls, SMS, MMS, Data and Pay TV and users of Electronic Communication Service [any communication through use of wire, radio, optical or electromagnetic transmission emissions or receiving system.’
The CST would mean consumers will have to pay more to talk or use other ICT services. In an economy already feeling the weight of recession, ALTON fears government wants to scare off consumers from patronizing telecom services. Besides, the added tax will further deepen the existing challenges of multiple taxations on operators,
“The Communication Service Tax will negatively impact take-up of consumer services and decline industry revenues. The proposed tax will reduce the incentive for telecom operators to invest in the infrastructure improvements that are essential to improve and expand mobile/broadband connectivity across Nigeria.
“Telecom industry investment in Nigeria is already constrained by multiple taxation and may not have room to contain the tax. There are 26 different taxes and fees levied on mobile operators and consumers, including national and local taxes on revenues, businesses and business sites as well as regulatory fees such as spectrum and permits fees.”
A CST would mean all the incentives for operators to rollout broadband infrastructures will cease to have effect. No one wants to stick his money where consumers are likely to shun an otherwise good service. ALTON believes the tax will jeopardize the National Broadband Plan.
“Broadband penetration remains low at less than 10%, with the government setting a target of 30% by 2018. There is more ground to cover as only less than 10% of telecom over 160 million subscribers can access broadband. The Nigeria Broadband market opportunity is huge in terms of distribution and penetration.
“According to statistics from the ITU, despite the fact that Nigeria has 45 million Internet users, the highest online population in Africa, only nine percent or about 14.5 million are actually internet subscribers. Opportunity exists for over 100 million potential internet users.” However, this opportunity will lose its shine in the face of unwholesome taxes. “High Consumer Taxes on Communication Services would Impact negatively on Economic and Broadband development. Today the country has more than 83 million unique subscribers, accounting for 45 per cent of the population. As well as providing access to financial services, Education and Healthcare to millions of citizens, many for the first time, telecoms has also played a critical role in reducing transportation, communication and transaction costs. Pushing up the cost to consumers, this tax will inevitably adversely impact the adoption of broadband affordability which is a key challenge in connecting the unconnected”
ALTON has called for a rethink warning that government could completely emasculate the telecom sector. “Our opinion is that the introduction and collection of the Tax without the exclusion of the applicability of the Value Added Tax (“VAT”) (which was introduced by the Value Added Tax Act and is also applicable to services rendered by Service Providers in the telecommunication sector) will amount to double taxation as the proposed Tax is an additional tax on communication services rendered to the same end users who already pay a five percent (5%) tax as VAT.
“Also the administration of this tax regime as proposed will be cumbersome and impractical. We must correct this general notion that service providers can absolve any tax without considering the capital and operational cost to the service providers.