What is the feeling of telecoms companies concerning the proposed communication tax bill?
There is a bill in the parliament, which is supposed to be a communication tax bill. Now it has gone through the first and second reading, and we were told it might be going through public reading before they would proceed to the next step. From what we have seen, this bill seeks to introduce a nine per cent tax on communication services, including voice, data, and broadband as well as pay TV services. It is going to be in addition to the existing taxes that are paid by users of telecommunications services across the country. This is what we know about it and as an industry; we are quite concerned about the letter of that bill.
How will this tax impact on the telecoms industry?
The implications are many because currently subscribers pay five per cent Value Added Tax on all communication services, including voice call and data subscription. Introducing another nine per cent in addition to all the other levies and taxes that are being charged the subscribers will amount to a 14 per cent tax on services. This certainly will widen the broadband penetration access and gap. So, if the government is talking on availability of broadband on one side, the tax as it is being proposed is contrary to the affordability policy of government. And we aim for 30 per cent broadband penetration by 2018.
We believe that the introduction of this tax will not make that a reality, and we are concerned to the extent that it will appear that the bill is insensitive to the challenges facing the subscribers. Affordability is a major issue. When some people run bills of several thousands of naira every month, there are a large number of subscribers who run only in several tens or hundreds of naira in a month. When you compare the average minimum wage, the per capital income of the people against the implications of introduction of this new tax, we feel that it will affect access to communication services and quite significantly too.
Do you think it is of any value to the 150 million subscribers in the country?
There is no value in it at all. We think it is just for the revenue objective of the government and it is contrary to the effort that is being made by the same government for broadband penetration. Today, as you are aware, telecommunications is an infrastructure of infrastructures. On our platform, a number of other services ride on it because once you have access to the Internet; it is as if you have a highway to the world to do a lot of things – e-banking, e-commerce, e-government, e-medical, and all that. So, when you deny people access to this gateway, you are certainly taking away their rights. In some jurisdictions now, the Internet is considered as the first right of citizenship. Therefore, if we are where we are, aiming for only 30 per cent penetration in broadband by 2018 with the efforts that the industry and the government are making, introduction of this tax at this time will just make the people unable to afford the services. Moreover, we think that more than the implication of the nine per cent, it will have a spiral effect on the entire industry. Other than subscribers paying five per cent for VAT, they are now going to be confronted with this nine per cent.
Operators are paying 12 per cent on ICT equipment excluding the corporate tax, which we also pay to the government and the rest of them. Administering this proposed tax, as it will be our duty as operators to collect on behalf of government, will increase our cost of operation because we will need to bring in more hands for tax administration. We will need to do more reports. So, it means our operating process will be a lot more complicated. The implication on subscribers is what it is: it will deny access, and for operators, it will increase our cost of doing business because we will have to do collection and report these collections back to the government and it just makes the entire process cumbersome. Government has withdrawn subsidies on fuel, and we know that the rate of wage increase is not commensurate with the rate of inflation. Once you remove those subsidies, and you don’t increase the income of the people, what that means is that you make it difficult for them to afford basic things. Transport cost has gone up. The prices of all other services have gone up since the withdrawal of fuel subsidies. Now telecoms service will go up. It will just continue to prevent access to this right of life. Communication means right of life.
You have talked about the concerns of the industry; how are you mobilising against this bill?
We are talking to all the stakeholders. We did a study with the GSM Association and we have written a joint letter to the Minister of Finance as well as the Minister of Communications. Copies of the letter have also been sent to all those who should know including the Nigerian Communications Commission; the President of the Senate; the Speaker of the House of Representatives; the chairman, House Committee on Communications; the chairman, Senate Committee on Communications, the chairman of Finance Committee, House of Representatives and the Senate. We have articulated the implications of this tax on the industry and the economy; and we hope that parties will look at this.
If the government is insisting on having more returns through tax, we think telecoms is the wrong sector to do this because telecoms drives other infrastructure. So, when telecoms works and people are able to afford telecoms services, they will buy into other services. Because of this, government can actually increase its tax base. But aiming this at telecoms, I think it is wrongly timed and we think government should have a rethink on this tax.
What if this bill is eventually passed into law, what will the industry do?
It will be against the best interest of Nigerian subscribers. As operators, we are law-abiding citizens, so we will continue to abide by the laws of the land. Nevertheless, it will deny people access to modern communication services. We are not a labour union, so we are not going to go on a protest. The best we can do is advocacy – to inform people about the possible implications. We believe that the government will have a rethink on this bill.
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