By Emeka Aginam

The GSMA, the industry association representing mobile operators worldwide in conjunction with Association of Licensed Telecommunications Operators of Nigeria ,ALTON, the  National Association of Telecommunications Subscribers,  NATCOMS and   the  Association of Telecommunications Companies of Nigeria , ATCON  have jointly written to the Federal government, expressing concern over the proposed bill by the National Assembly  for the establishment of a tax on electronic communication services in Nigeria.

The group in a letter to the Minister  of Finance, Mrs Kemi Adeosun, and the Minister of Communications, Mr Adebayo Shittu jointly signed by Mortimer Hope, Director Africa, GSMA, Engr. Gbenga Adebayo, Chairman, ALTON ,  Engr. Lanre Ajayi, President ATCON and  Chief Adeolu Ogunbanjo, National  President, NATCOMS  noted that the  the proposed bill  under consideration by the National Assembly, to establish a 9% communication service tax to be levied on charges payable by a user of an electronic communication service (i.e., SMS, voice calls, MMS, data usage) supplied by service providers will not promote telecommunication development in the country.

According to the group, the tax if introduced will result in an increase in prices for consumers, have adverse impacts on the adoption of mobile services and industry investment, adding that it will be  counter-productive to the longer term national digital strategy objectives set by the Government of Nigeria.

Increased affordability barriers to the uptake of mobile

“The socio-economic impact of mobile penetration is now widely recognised. According to

research conducted by the World Bank, a 10% increase in mobile broadband penetration in

low to middle income countries leads to a 1.38% increase in GDP growth”, the group said.

According to the group in the letter, “Today, 83 million people in Nigeria have access to mobile services. With over half of the population without a mobile connection, affordability remains a key challenge to connect the unconnected, who are typically lower income population groups.

Further taxation on electronic communication services will hit lower income consumers the most, who are already struggling due to the adverse economic situation and increased price pressure and for whom affordable access to information and communication technology is critical to their social and economic inclusion.

“Moreover, this will result in a double taxation for consumers who already pay Value Added Taxes on telecommunications services”

Impact on  digital economy

While in   2014, the mobile ecosystem contributed USD8.3 billion to the Nigerian economy, the group added that this is set to increase as penetration of voice and broadband services grows.

“ The potential of mobile broadband is apparent from the rapid development of the digital economy in Nigeria and is supported by a diverse and growing local ecosystem. Usage of apps is growing by up to 30% annually for example.

“The development of a competitive digital economy, boosted by mobile penetration and

investment in networks will, over time, strengthen the economy as a whole leading to faster

economic growth together with higher fiscal income for the government from a broader tax

base”, the group noted.

Negative impact on mobile industry investment

 By impacting usage of communications services and in turn industry revenues, the  proposed tax, according to the would  have adverse effect on the industry investment needed to improve and expand mobile connectivity across the country.

Mobile industry investment in Nigeria, the group said was  already constrained by multiple level of taxes and fees

set by local and regional authorities, in addition to fees to the national telecommunications

regulator and high costs of right of ways.

“In a context of declining average revenue per user, this can make it more difficult for mobile operators to make a business case for investment.

“The proposal would also further increase the administrative cost burden on service providers

to comply with numerous and complex tax regulations, already high compared to other

countries.

“In view of the above, we respectfully request your urgent intervention to prevent the adoption

of a new tax on electronic communications services.

“We remain available to meet with you to progress dialogue and to ensure the digital economy delivers its full potential in Nigeria”, the group explained.