President Muhammadu Buhari has approved the immediate suspension of the proposed excise duty in the telecommunication sector.
The president also approved the constitution of a committee to look into the matter and advise him carefully on the next steps to take. BusinessDay had recently reported that the proposed excise duty on telecoms will hinder the penetration of broadband in the country.
Isa Pantami, minister of communications and digital economy disclosed this on Monday during the inauguration of the ‘presidential committee on excise duty for the digital economy sector’. The minister, who is also the chairman of the committee he inaugurated in Abuja, said the president decided to suspend the taxation after a petition he wrote explaining that the decision will put more hardship on citizens and have a negative impact on the economy.
“Recently, it was announced that government officials have kick-started the process of introducing excise duty in the telecommunication sector. Based on the constitution of Nigeria, and being the representative of president Buhari in the sector, I rejected that wholeheartedly on the 2nd August 2022. I explained to president muhammdu Buhari in my letter that it could serve as a petition that we are not in support,” Pantami said.
He argued that excise duty is usually enforced in luxury products in most countries, such as alcohol, cigarettes or sugar, and is done to reduce consumption of certain products. The minister said broadband and telecommunication services have become essential services and no longer a luxury especially as it supports learning, e-business operations among others.
“By implication, if we are introducing that, we are discouraging the citizens from being part of the digital economy; making calls, online learning or other business activities in e-commerce and others. I explained to the President that the economic situation doesn’t allow putting more burden on our citizens on a matter that is becoming more of a necessity by the day,” Pantami said.
“Because of this, I told Mr. President that the attempt will destroy the sector that is becoming the backbone of our economy . Secondly, it will add more hardship to citizens in Nigeria. It is because of this that Mr president has immediately approved my prayers,” Pantami further said.
The minister, while stressing that the ICT sector has become the backbone of the economy noted that the sector has grown at an unprecedented rate and is still growing; but decried that the issue of multiple and excessive taxation may destroy the sector and erode gains made so far.
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Pantami lamented that the level of taxation has become worrisome, and that “the sector is overburdened with so many tax categories to the extent that there are 41 categories being paid from the ICT sector alone, particularly the telecommunication sub sector.”
“Beside these, there is multiple taxation, the same tax being collected at the federal level, some states insist that it should be remitted to their coffers. If care is not taken, this is going to jeopardise the achievement and gain we have recorded so far in the sector,” he added.
Speaking on the impact of the sector on the economy, Pantami informed that the sector exceeded targets set in the last three years in terms of contribution to the GDP. In the last quarter of 2020, Pantami said ICT alone contributed 14.07 percent to the GDP, and by the second quarter of 2021,the sector contributed 17.92 percent, and 18.44 percent in the fourth quarter of 2022.
“By implication, this sector has been contributing a lot to the economy of Nigeria particularly at the time that all other sectors are coming down in spite of government’s investment in the area of subsidy. But, the digital economy sector, without any significant subsidy, has been recording unprecedented achievement year in year out,” the minister said.
He also noted that the auctioning of the 5G spectrum generated $547 million for Nigeria in addition to billions and billions that the sector has been remitting through spectrum licence, operating licence among others.
The minister further disclosed that in 2021, MTN alone contributed approximately 13.5 percent of the entire tax collection by the federal inland revenue service (FIRS), and was the largest contributor after remitting N757 billion through direct and indirect tax to FIRS.
“By implication, the ICT sector is today the backbone of our economy in Nigeria, the backbone of our tax collection. However, in spite of the contribution of the sector, we have witnessed some challenges that if care is not taken, could be a barrier to the development of this sector in the next few years to come,” the minister added.
Pantami said the committee has been mandated to be fair and objective to all the stakeholders involved in addressing the issue around excise duty. The committee members include; the minister of finance, budget and national planning, the chairman of FIRS, the executive vice chairman /CEO of NCC, representatives of mobile network operators. The minister said the committee could be allowed to accommodate any other institution of government whose involvement would be key to addressing the matter effectively.
Meanwhile, Pantami noted that he has prevented about 15 attempts by operators to review and increase the prices of services duty to challenges that affect cost of production such as price of petroleum products, exchange rates, inflation, devaluation of currency among others .
The minister however pleaded with operators to remain patient and allow the government to address the challenges affecting the sector. He said, “The prices and products have not increased in the telecommunication sector unlike aviation, transport, industry among others. The mobile network operators have been coming up with so many initiatives requesting the regulator to allow them review the prices upward ,but I always urge them not to do that, but persevere with the little profit they are making because the economic situation in Nigeria doesn’t allow us to add more burden on our poor citizens suffering on how to even get three square meals daily,” he said.
“Broadband and telecommunication services are becoming more of a necessity rather than luxury. Within these few years, there were one than 15 attempts to increase the prices of telecommunication services and in all, I retained my position by saying no. We apologise to the operators and we will try to address many more challenges to reduce the cost of production so that you can get small profits,” the minister said.
