The 9 percent Communication Service Tax (CST) that was previously suspended by the 8th National Assembly has resurfaced in the 9th NASS and is being considered for passage into law even after major kicks by industry stakeholders.
The Communication Service Tax (CST) Bill 2015, if passed into law, will require consumers of voice, data, short message service (SMS), multimedia message services (MMS) and payTV services to pay a 9 percent tax on the fees paid for the use of these services. The tax will be collected in addition to the 5 percent Value Added Tax (VAT) that consumers already pay when they purchase devices and communication services, as well as the 12 percent Customs import duty paid on ICT devices, and the 20 percent tax levied on SIM cards.
The 9 percent Communication Service Tax is double taxation on voice, SMS and data services as 5 percent VAT already applies on these services, experts say.
Olusola Teniola, president, Association of Telecommunications Companies of Nigeria (ATCON), said the adoption of CST represents an additional burden when applied to a subscriber base of 173 million.
“If the passage of this bill goes through, it would negatively impact Nigerians and foreigners that use these services. The implementation of this CST bill would take the affordability of data services out of the reach of the citizenry,” Olusola said.
The bill was introduced in 2015. In November 2016, ATCON waded in and recommended to government through the then senate president, Bukola Saraki, that the tax base of the country be widened to include more taxpayers. It was noted that only 13 million out of 70 million eligible taxpayers were contributing to the tax revenue of the Federal Government.
“Since 2016, Nigeria has undergone a recession and experienced low GDP growth rate coupled with government recurrent expenditure that now exceeds oil revenue. Therefore, we understand that measures to shore up government income in the way of taxes should be explored. However, government needs to also consider a reduction in the cost of governance that will fit within the new government revenue generated through taxes and oil receipts,” ATCON said in a recent statement sent to BusinessDay.
“It is inconceivable that a CST Bill of 9 percent that was put aside which is a direct copy of Ghana’s CST is now being pushed through the National Assembly without due consultation with all stakeholders and it is especially targeted at the telecoms and ICT sector,” it said.
Adebayo Shittu, former minister of communications, also pushed back on the proposed bill saying that already, over 60 million Nigerians were unable to afford basic broadband connection and this, to a large extent, would be a cog in the wheel of further deepening of broadband penetration levels in the country.
“The proposed Bill will also discourage further investment in the communication industry due to reduced returns on investment and, ultimately, drastically reduce the sector’s huge contributions to the national GDP. Some have concluded that the proposed CST Bill is an ill wind that would blow the country no good,” Shittu argued.
“My focus on any tax regime will be to align any process that will stimulate the economy and also ensure that the tax system is efficient by widening the tax net and creating an effective framework for tax compliance to protect the poor and vulnerable in the society who nonetheless have to use telecom services for social inclusion and financial services, among others,” he said.
Industry analysts say the burden of shoring up government revenue should be across all segments of society in the way other climes use VAT and not to be targeted to a specific sector.
They say the bill is discriminatory because it targets only the communication industry to the exclusion of other sectors of the economy.
JUMOKE AKIYODE-LAWANSON
