Communication Tax Bill: Not in subscribers’ interest

At a time when majority of Nigerians are groaning under the heavy burden of economic difficulties, the National Assembly appears to be poised to add to the people’s sufferings. If the lawmakers are allowed to have their way, a law that will impose more tax on the subscribers will soon be in place.

Known as the Communication Tax Bill, the proposed legislation has as one of its proponents a frontline lawmaker, Senator Ali Ndume, who is the leader of the Senate. The draft Bill, which is also before the House of Representatives, will compel communication consumers to pay nine percent of the fees payable for the service as service charge. By the CST Bill, subscribers to communication services such as voice calls, short message service (SMS) and multimedia service (MMS), data usage and Pay TV.

As a means of collecting this tax, service providers will be required to add nine per cent tax or service charge to the cost of the service being paid for by the consumer, and remit same to Federal Inland Revenue Service on a monthly basis.

For those who are not yet aware, this additional tax will usher in a chain of unpleasant events. Among other things, it is bound to increase the tax burden of subscribers. That means, it will make communication services more expensive for consumers and the high cost of service would prevent a large number from subscribing to data services, thereby serving as drawback to Nigeria’s National Broadband Plan (NBP). The supervision of the International Telecommunication Union (ITU) had set a broadband penetration target of 30 per cent by 2018 for Nigeria.

There is a growing concern within the communication industry that implementation of the CST Bill will be counter-productive to the achievement of the objectives of the NBP.

According to a coalition of telecommunication interest groups, led by the GSM Association, increased cost of service caused by this extra tax will lead to a general reduction in the consumer’s buying power thereby forcing them to forego or reduce subscription to certain services, and defeating the objective of making communication service available to the poor and the vulnerable.

The group, which included Association of Licensed Telecommunications Operators of Nigeria (ALTON), the Association of Telecommunications Companies of Nigeria (ATCON) and the National Association of Telecommunications Subscribers (NATCOMS), has protested to relevant cabinet ministers and are also engaged in the lobby of well-meaning members of the National Assembly to ensure that the Bill is jettisoned.

The petition, addressed to the Minister of Finance, Mrs Kemi Adeosun, and her Communications counterpart, Barrister Adebayo Shittu, had as signatories leaders of the respective interest groups.

The thrust of their complaint, which has since been echoed by consumer rights advocates and other well-meaning individuals and groups, is that further taxation of electronic communication services would the hit lower income consumers the most. Emeka Ojiogor, a consumer rights campaigner, noted that “This class of people is already struggling due to the adverse economic situation and increased price pressures due to the fall in oil prices in the international market and the dwindling value of the local currency.”

“The ability of the poor and vulnerable to access ICT depends on affordability. This tax will make communication service unaffordable. With it, the sustainable development goals for social and economic inclusion of the Federal Government cannot be achieved,” he further said.

It has been accepted that affordable communication services will promote social inclusion and make financial services accessible to the unbanked. With only about 83 million Nigerians having access to telecommunication services, a large section of the population still does not use mobile services due to the low purchasing power of a vast majority of the population.
It is therefore argued that increasing the cost of these services will definitely result in the exclusion of even more low income earners from the use of mobile telecommunication services, which indeed is a fundamental human right of all – rich or poor.

According to the GSMA-led coalition, increase in tax would affect profitability, reduce profitability and make it difficult for mobile operators to justify further investment in the sector. “The reduction in investment will lead to job losses and poor quality of service,” Adeolu Ogunbanjo, NATCOMS president, argued.

A recent research conducted by the World Bank reveals that a 10 per cent increase in mobile broadband penetration in low to middle income countries (to which Nigeria belongs) leads to a 1.38 per cent increase in Gross Domestic Product (GDP) growth. It is therefore imperative that a reduction in mobile broadband penetration due to unaffordable services will invariably affect GDP growth negatively.

The CST will compound the issue of multiple taxation, which has plagued the telecommunications industry at the Federal, State and Local Government levels, and have adverse effect on industry investment needed to improve and expand mobile connectivity across the country, as well as relieve dependence on oil revenue.

Obioma Ogulewe