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Stakeholders express frustration over government policies on telecoms

*ATCON, ALTON, AFICTA, others kick against 9% comm tax
*Carpet Emefiele on “three minutes” surcharge on call
*Say Communication Tax antithetical to economic growth
*Propose 1%Vat increase across board

By Prince Osuagwu (Hi-Tech Editor) & Emmanuel Elebeke

Several Information and Communications Technology players in the country are expressing serious frustrations over some of the policies coming from government, particularly aiming at using telecommunications as a means of revenue generation.

Although the stakeholders agreed that there was need for government to generate more income in order to provide adequate infrastructure for the better business environment for the telecom operators, they however expressed doubt that over taxing telecom operators would provide any positive result.PHONES-A

They decried the situation where different levels of government come up with all manners of taxes and levies which they claim are capable of crashing telecoms activities in the country.

Chief among their worry is the proposed nine percent telecommunications tax which the federal government is trying to introduce. They argued that allowing such policies to stand would gradually kill the telecom industry, which is presently contributing about 10 per cent to the country’s Gross Domestic Product (GDP).

Umbrella body of the telecom companies in Nigeria, the Association of Telecommunication Companies of Nigeria (ATCON), through its President Mr Olusola Teniola has just hit out at government over the proposed tax bill, saying it seems the government is feigning ignorance to the calamity that can befall the Nigerian economy should the operators be weakened to the point where they close shops one after another.

According to him, the telecom sector is critical to re-engineering the present recession and takes the country out of a possible depression, but the government policy-making appears uncertain and haphazard, especially as it concerns investments.

He specifically took on the Central Bank of Nigeria, CBN Governor, Mr. Godwin Emefiele who recently suggested a ‘three-minutes’ surcharge on telecommunications consumers.

Teniola said that the proposal was not only technically wrong but also economically faulty.

“How can anyone suggest that government should impose taxes on phone conversations that lasted more than three minutes as an alternative source of revenue?” he questioned.

If this happens, it will not only have economic effect but social effects because people will be economizing the way they talk on phone and the revenue of the operators will drop. To remain in business they will resort to increase in cost and that will be borne by the users. When the very essence of the thing that makes Nigerian telecom sector juicy is gone, investors will leave and others intending to come will hold back their money” he added.

1% VAT increase across board

On the nine percent telecom tax, Teniola said his group has made a presentation on the negative impact of the bill to the Senate president and expressed optimism that the Senators would not approve bills that would be anti-people.

He revealed that rather that outrageous tax proposal, ATCON has suggested that government consider one percent VAT increase across board. “That is what we suggested to the senate. They understood it because it was a legitimate plea. We are talking of diversifying the economy towards telecom, so it makes no economic sense to begin to tax the same sector you are banking on to salvage the economy” he said.

The Federal Government  in March this year, introduced a draft bill now before the National Assembly. The bill, known as the Communication Service Tax Bill 2015, which has reportedly passed its first reading at the Senate, seeks to introduce a tax of nine per cent on electronic communication service fees charged by service providers.

The proposed tax includes: charges on voice calls, short message service (SMS), multimedia messaging service (MMS), data usage from other telecoms service providers, internet service and pay television stations.

The new tax regime also provides that communication service providers will be required to charge Communication Service Tax (CST) on the specified services and remit it to the Federal Inland Revenue (FIRS).

However, since its introduction, the bill has attracted several reactions from stakeholders in the nation’s communication industry as well as consumers.

Some key stakeholders and practitioners in the ICT industry have queried the rationale behind the introduction of the tax bill by Federal Government.

Although, the Minister of Communication, Adebayo Shittu, earlier absolved the Federal Government of knowing about the introduction, claiming that the bill was actually introduced by a lawmaker and so cannot be called an executive bill, but  the government, however, gave a nod to the bill.

Stakeholders are of the opinion that depite the fact that the sector has continued to maintain a bullish performance in terms of contribution to the nation’s GDP from   9.1 per cent in 2015 to over 12.8 per cent in Q2 2016 and   over $6 billion in FDI flowed into the telecoms sector between 2011 and 2016, any attempt to introduce additional tax to the existing multiple taxation being complained about by the service providers would not be in the interest of the people and economy at large.


Also reacting to the development, the  Chairman of African Information and Communications Technologies Alliance (AFICTA), Dr. Jimson Olufuye,  said the promoters of the Communication tax bill would have succeeded in undermining the ongoing effort to get Nigeria fully digitalized if such bill sails through.

For him, affordability is a major issue in the campaign to deepen communication and internet connectivity access in the country and when people are compelled to pay more in a period of recession and multiple taxation regime, then the whole idea would become counter-productive.

“We are talking about getting more people onboard internet to be on the digital environment. We don’t have to bring in new frictions to achieve that purpose. New tax regime is a friction. It will be counterproductive if the bill sails through.

“Affordability is a major issue, if tax increase, cost will increase also. So, it is best government tidy up existing tax processes, so as to get Nigerians pay their taxes”.

Policy summersault

Also reacting, the former President of Nigerian Internet Registration Association, NIRA Mary Uduma, said that government ought to have considered the effect of increasing communication tax on the average users of telecommunication services before the introduction.

She urged government to seek for an alternative source of revenue to raise more fund to fix telecommunication infrastructure as claimed by the Minister of Communications Technology.

I am not looking at justice but on the effects on the take home of an average user of telecommunication services. For now, I don’t think it is right for us to introduce this tax. We are still building up.

Some taxes have already been paid before the service is rendered. So, this is adding more to the existing tax.

She warned that investors are afraid of policy summersault and advised government to look inwards to unravel alternative sources and block all the leakages in the existing tax collection processes.

Nigerians are hungry to talk

On why, recession is not affecting the telecom sector, Uduma said, “recession is not affecting the telecom sector because we are hungry to talk. And we have been denied these services over the years. When it finally came, it made our lives simpler. So, we cannot just stop talking, we will continue, even if government brings tax, we will continue”.

Bill targeted at the poor      

In his own opinion,   the Chairman, Nigerian Computer Society, NCS,Communication Committee and Managing Director, Jidaw Systsems Limited, Mr. Jide Awe, expressed worry that the proponents of the bill, did not take into consideration that the bill if passed into law will affect the poor people more.

According to him, the ability of people to communicate enables them do more business but with the introduction of the new tax, their businesses will be hampered.

“I can’t justify it because it will increase the cost of communication. The people that are going to be affected are the poor and people that are struggling to make both ends meet. ‘For me, communication is a tool to enable people do business. How can the new tax reduce the cost of doing business? It will instead increase it” he warned.

The Association of Licensed Telecommunications Operators of Nigeria (ALTON) on its part had cautioned federal government over the move to introduce communications tax saying that it will not only amount to double taxation but stifling the operators.



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