How Desirable is 5% Excise Duty on Telecom Services?

By Ibrahim Dan Halilu

The Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed has thrown Nigeria into another controversy amidst plans to launch the 5G network, which is expected to transform every sector and sphere of life of the citizenry.

Coming at a time when Nigeria warming up to launch the largest high speed mobile network technology (5G) in Africa, the 5% excise duty on telecom services being implemented by the Federal Ministry of Finance and the Nigeria Customs Service, is not only a negation of the laudable gains of the Buhari administration in the telecom sector but another incontrovertible proof of the administration’s poor policy coordination.

The expectation of most Nigerians is that the Finance Minister and the Controller General of the Nigeria Customs Service who are the prime advocates of the 5% excise duty will engage with the Ministry of Communications and Digital Economy under whose purview the telecom sector presides, and the Nigerian Communications Commission (NCC) which is the telecom sector regulator, to create a synergy before rolling out the new tax regime.

It is no brainer to understand the imperative of engaging with these two government institutions whose role is central to all that the administration has achieved in that sector.

The NCC has over the years implemented various initiatives and programmes that have stabilized the telecom sector and created a very healthy environment for the industry to thrive and offer quality and affordable service to Nigerians.

The commission’s declaration of 2016 as the Year of the Telecom Consumers has placed premium on the consumer as king who should be treated with respect and offered value for money.

Conversely for the mobile network operators who enjoyed massive support of the Commission disputes resolution, protection of critical telecom infrastructures, and restoration of operational facilities that enhance better performance of the industry.

The Commission has played a very strategic role in resisting arbitrary hike in tariffs and other charges for telecom services which can impose additional burden on the consumers. Instead, the NCC envisions a new tariff regime that has not only reduced the cost of data by more than 100% but further increased access to telecom services in Nigeria.

Its robust National Broadband Policy 2020-2025 is aimed at achieving a new landmark in telecom operations in Nigeria as it rolls out the 5G technology that will change the way of doing almost everything.

Similarly, the Ministry of Communications and Digital Economy through its indefatigable minister, Prof. Isa Ali Pantami has launched Nigeria on the world map of countries that are transiting from analogue to digital economy with the unveiling of a robust policy on 5G Network and Digital Economy.

These are commendable efforts that should be complimented by the Federal Ministry of Finance and Nigeria Customs Service (NCS) through advocacy for a downward review or complete removal of some of the tariffs imposed on the MNOs and other service providers.

The presidential inauguration of a 27-person committee charged with the teak of exploring ways of improving Nigeria’s ranking on the Ease of Doing Business, should have been followed by an aggressive drive of the Federal Ministry of Finance to streamline some of the regulatory measures that hinder the effective performance of the industry such as multiple taxation, and promote policies that will remove barriers to consumer adoption of the new technology.

It is on this note that one wishes to appeal to the Minister of Finance to exercise the power conferred on her by the Finance Act 2020 with caution and empathy to the Nigerian consumers who are already overburdened by new series of taxes introduced by the Buhari Administration.

The Minster needs to find equilibrium between government’s desires to raise more funds and citizen’s expectations for better welfare as the destabilizing effects of the new tax regime outweigh its monetary benefits both to the economy and the citizens.

Firstly, the policy will reverse the gains recorded by the NCC in reducing the cost of telecom services to the consumer and efficient service by the Mobile Network operators (MNOs) who have to contend with multiple taxations and increased operation costs.

Secondly, the new policy may further have adverse effect on the flow of both foreign and local investment in the broadband infrastructure that is needed to scale up the deployment of 5G network to other cities across the country. The MNOs are already groaning under an indiscriminate multiple taxation policy that make is harming their business.

The greatest damage the new tariff will do to Nigeria’s telecom sector is derailing the rollout and total adoption of the 5G network that is being test run by the major telecom service network, the MTN whose competitor, Mafab has already announced an extension of the 5G launch to end of the year due to unforeseen challenges.

The Federal Government’s policy on 5G Spectrum for Digital Economy driven by the Ministry of Communication and Digital Economy may suffer a setback under the new harsh tax regime that targets the telecom sector as a major revenue earner for government. The imposition of the 5% excise duty will be an additional burden on small businesses and individuals who wish to take advantage of the benefits and opportunities offered by the 5G network to expand and improve their businesses as they may face a new tariff regime.

Another possible consequence of the new tax regime is retarding the progress made in launching Nigeria into the open governance platform that promotes transparency and accountability, while enhancing citizens’ participation in governance as any increase in tariff will lead to low patronage of the telecom services.

It is my candid view therefore that the introduction of 5% excise duty on telecom services is both untimely and undesirable for Nigeria whose majority citizens are living below poverty margin, and have no visible source of income.

The Federal Ministry of Finance and the Nigeria Customs Service should dissipate more energy on initiating people-centred policies that will support the NCC in performing its regulatory functions instead of frustrating the laudable efforts of the commission to promote affordable and efficient telecom services in Nigeria.

The duo should regard themselves as a part of the same government that enunciated the policy of promoting digital economy through universal access to telecom services for Nigerians instead of a separate entity that competes for space or attention.

In her search for new avenues to improve government revenue, the Finance Minister should look beyond imposing excise duty on telecom services, and engage with the public and other stake holders to explore other options that are richly available.

The government can tilt the scale towards diversifying its revenue generation to imports for luxury items, luxury life-styles, and reducing the cost of governance at different levels. There are many wasteful spending that can be scaled down to save money for government to meet its financial obligations which is the main thrust of the Minster’s argument.

These include the purchase of exotic vehicles for public office holders, foreign travels, high duty allowances, and foreign trainings for public officials. Others are blocking the conduit pipes and confronting corruption head on. These and many others will spare a huge sum that can be channeled to more productive projects that will impact on the lives of the people.

The rush to impose new tax regime on consumers of telecom services will be self-defeating, if at the end of the day the only benefit it accrues to the government is more money to spend instead of better welfare for citizens.

The telecom services are no longer a luxury but necessary tools that Nigerians need to connect with the rest of the word, share their ideas, knowledge, and information for a much better society.

The government should not shut out Nigerians or make it impossible for them to reach out to the rest of the world to market their skills, talents, and products in return for the much needed foreign exchange which is the essence of the digital economy which is the fulcrum of the administration’s |economic policy.

Nigerians deserve efficient and affordable telecom services to conduct their business activities on a global scale, which the controversial 5% excise duty seems to negate. It is a right, not privilege!

Ibrahim Dan Halilu is an Abuja based media consultant and communication expert. He can be reached via email at [email protected] or mobile 08101064449 9SMS only).