The Federal Government of Nigeria has suspended the proposed excise levy on communications services.
On July 28, the administration suggested that it would add a new fee to the 7.5% value-added tax already in place on telecommunications services. More than 39 taxes already affect Nigerian telecom carriers. The 7.5% value-added tax (VAT) that subscribers were already paying to the federal government was to be combined with the new 5% tax for a total of 12.5% tax. Nigeria has put off a new telecoms tax that was supposed to help fix the country’s budget deficit, which is expected to reach record levels in 2019.
Isa Pantami, the minister of communications, stated in an email that the government had formed a committee to study the 5% tax that was supposed to take effect this year. Following the release of the report, it will decide on the tax. The largest mobile carrier in the nation, MTN Group Ltd., saw an increase in share price.
The minister said President Muhammadu Buhari had permitted a new committee to study the tax because it could “destroy” the digital economy industry.
Pantami says that there are 41 taxes at the federal and state levels, most of which are in the telecom industry and could slow the growth of the ICT sector in the coming years.
Nigeria has put a hold on implementing a new telecoms tax intended to improve the country’s budget deficit, which is predicted to reach record levels in 2019.
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Isa Pantami, the minister of communications, stated in an email that the government formed a committee to study the 5% tax that was supposed to take effect this year. Following the release of the report, it will decide on the tax. The largest mobile carrier in the nation, MTN Group Ltd., saw an increase in share price. The 5% tax the Nigerian federal government intended to impose on telecom services, such as calls, SMS, and data, has been suspended. On Monday, September 5, Communications Minister Isa Pantami made the announcement.
Nigeria’s value-added telecom tax
One of the clauses in Nigeria’s 2020 Finance Act is the tax. The aforementioned clause required telecom operators to collect and send the tax to Nigerian customs by the 21st of each month.
To boost income in the face of falling oil and gas earnings, the government would begin enforcing the clause in July 2022, according to Finance Minister Zainab Ahmed. Thanks to that tax, an additional NGN150 billion (US$361 million) was anticipated. Telecom companies immediately criticised the proposal, calling it unpopular, confrontational, odd, disrespectful, and irresponsible. Minister Isa Pantami opposed it, claiming that the industry was already overtaxed. Despite a challenging business environment characterized by rising inflation, a weaker naira, and increased operating costs, the new tax was to be added to the 39 others already imposed on telecom providers.
A 40 per cent rise in communication fees was proposed by telecom companies around two months ago, but the government vehemently opposed it. At the time, Isa Pantami stated that operators had attempted to raise their prices more than 15 times over the previous three years, but without success. As the new duty was suspended, telecom companies that are members of the National Association of Telecom Subscribers decided against suing the government.
The initial plan by the Federal Government of Nigeria to impose a tax on telecoms.
The people in the industry have spoken out against the government’s plan to add a 5% tax to all telecommunications services in Nigeria.
Ajibola Olude, the Executive Secretary of the Association of Telecommunications Companies of Nigeria (ATCON), said at the Stakeholders Consultative Forum on Implementation of Excise Duty in Abuja that the government should change its mind about putting a 5% excise duty on telecommunications operators because Nigeria is having a hard time right now.
He said that the government should put its money into other industries to make the economy more diverse.
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Mrs Zainab Ahmed, the Minister of Finance, Budget, and National Planning, was the main speaker at the event. She asked people to support putting the 5% excise levy on telecommunications services into place.
Zainab expressed her gratitude to the Nigeria Communications Commission (NCC) for giving her the opportunity to boost Nigeria’s income generation through the Assistant Director, Tax and Policy, Mr Musa Umar.
She stressed that for Nigeria’s economy to change in a lasting way, other African countries like Malawi, Uganda, Tanzania, and others must use this strategy to bring in money.
The nation’s digital economy will remain thriving now that the government has suspended the intended additional tax.