OVERBURDENING TELECOM SUBSCRIBERS

   The proposed five per cent excise duty will bring extra burden on subscribers, argues Sonny Aragba-Akpore

If the federal government goes ahead with the implementation of the proposed 5% excise duty on telecom services, subscribers are likely to pay 12.5% extra for services enjoyed on the various telecom platforms. This is because in March this year, the federal government had announced the implementation of the proposed excise duty in spite of the 7.5% Value Added Tax (VAT) paid by all on such services.

This additional cost on the subscribers according to the Finance, Budget, and National Planning Minister, Mrs. Zainab Ahmed is part of the government’s moves to diversify its source of revenue to the non-oil sector. “Payment is to be made on monthly basis, on or before the 21st of every month. The duty rate was not captured in the Act because it is the responsibility of the president to fix the rate on excise duties and he has fixed five percent for telecommunication services which include GSM. It is public knowledge that our revenue cannot run our financial obligations, so we are to shift our attention to non-oil revenue. The responsibility of generating revenue to run government lies with us all,” the Minister said at the stakeholders meeting hosted by the industry regulator, the Nigerian Communications Commission (NCC) in Abuja.


But the Association of Licensed Telecom Operators of Nigeria (ALTON) said it may not be able to subsidize the subscribers further in light of the cost of providing services which they put at 35% for operation alone. ALTON Chairman, Mr.Gbenga Adebayo told the stakeholders that its members including MTN, Globacom, Airtel, and 9mobile, among others are already in dire straits given the cost of operation. Then this 5% excise duty which they may not be able to absorb as the economy stands. Although there is no take-off date yet as stakeholders are still in talks to prevail on the government for a rethink, the onus resides with the minister to advise the government on the implications.

Stakeholders agree with the World Bank position that Nigeria is one of the countries in the world with poor tax regimes thereby necessitating a very wide financing gap for national development. While canvassing for adequate tax policies to cushion development, they reasoned that extra burden on subscribers may not augur well for everybody. Telecom operators are currently bugged down with 39 multiple taxes including VAT and the 2.5% Annual Operating Levy (AOL) of their yearly incomes which have dipped dangerously into their operating costs and so may shift the 5% excise duty burden to subscribers.



Telecom operators had proposed a 40% hike in the cost of calls, SMS, and data a few months ago, blaming the unfavourable operating environment for their actions. But the NCC countered by arguing that further price hikes could frustrate subscribers’ expenditure for existing and envisaged services. Whether this was a populist position or in tandem with economic realities has left everyone guessing.



Although the NCC has not said anything wrong about the excise duty because it is a government policy as enshrined in the Finance Act of 2020, its Chief Executive, Prof Umar Danbatta recently told stakeholders that the new policy came out of the Finance Act of 2020. Quoting section 37 of the Finance Act 2020, Danbatta said the government amended section 21 of the Customs & Excise Tariff by inserting subsection 2, which provides as follows: “Telecommunications services provided in Nigeria shall be charged with duties of excise at the rates specified under the duty column in the Schedule as the President may by Order prescribe pursuant to Section 13 of the Act”.


On the basis of that intervention, the NCC appears to be seen as following government position. But operators are worried that despite all the burden they already carry, this excise duty is clearly an extra burden. For instance, the operators have asked a few pertinent questions. They would want to know if the 5% excise duty will be deducted on sales, which agency of government is collecting: Nigeria Customs Service (NCS) or the Federal Inland Revenue Service (FIRS). They also want to know the mode of collection. By their argument, if the tariff increase is only going to be on the 5% excise duty, there is no need for the administrative fee charged by the commission henceforth otherwise “we may be unable to address it all by ourselves,” according to Adebayo.


The operators’ list of taxes/payments include but not limited to the following: Increase in energy costs, especially Diesel which has risen from N225/liter in January 2022 to over N700 per litre as of today since Diesel constitutes about 35% of ALTON’s members operating expenses to power operators’ Towers, Base Stations and Offices. There is additional burden of multiple taxes and levies currently borne by members across the states in the federation especially for Right of Way. Recent increases/introductions of new financial obligations by the commission also constitute a burden for the operators.

In the last two years, the commission has reviewed the annual numbering fees by setting a N20 flat fee per line, introduced N350,000 and N250,000 administrative fee for tariff modifications and revalidations respectively as well as a fee of 1% of the invoiced amount as a Confirmation of Reasonableness of Services (CRS) processing fee introduced in September 2021.


ALTON has also expressed its worries over the proposed amended Guidelines on Promotional Advertisements released this July 2022 also introduced separate payment heads for promotions that have lottery and lottery with Gaming Services. It has increased the fees for new and renewal of promotions. Even the current draft amended Frequency Spectrum Pricing Regulations proposes an over 300% increase in the unit price per MHz for some licensing regions. For example, the draft regulations propose a 303.3% increase in the unit price per MHz in the Lagos licensing region (i.e., from N3,000,000/unit to N12,100,200).


In general terms, the cost of doing business in Nigeria for members according to ALTON is on an upward trajectory adding that the Nigerian currency the Naira is on a freefall, thereby affecting the forex needed for equipment and parts importation, hard to source from official channels at the CBN rate and decreased purchasing power for Nigeria due to erosion of the Naira’s value. “This lends credence to recent research which posits that the general cost of doing business in Nigeria has risen by 40% which will heighten the spiraling inflation in the country; timing of the implementation of the Excise Duty is not conducive due to the impact it will have on operators’ services,” Adebayo submitted.

 But Communications & Digital Economy Minister, Dr. Isa Pantami frowns at the new 5% excise duty saying neither him nor his Ministry was consulted before government came up with that position. He spoke early in the week in Lagos at a local content conference. He specifically said he was going to resist it since he has the president’s mandate to challenge any policy that could spell negative outcome for the government.


Industry reports say subscribers spent about N2 trillion on calls and data in the first six months of 2020. In 2021, it was N1.77 trillion. Data for Q1 and Q2, 2022 show that subscribers have spent over N1.25 trillion on telephony services so far. The Excise Duty on telecom services was introduced through Finance Act 2020. The 5% excise duty is to be administered by Nigerian Customs Service (NCS) according to the Fifth Schedule of Common External Tariff (CET). 5% Excise duty rate will be charged on all services regulated by the Customs and Excise Management Act Cap C45 LFN 2004 (CEMA). Section 117 (2) states that “the date of payment shall be on or not later than the 21st day of the month following that in which the Excise duty became due”.


With the extra burden on subscribers, it is not clear how ordinary folks will cope especially with spiraling costs of every aspect of an economy, but the onus is on government to have a rethink this common denominator which provides the nexus for people to reach each other even if all else fails.

Aragba-Akpore is a member of THISDAY Editorial Board