March 22, 2023

FG finally exempts telecom from 5% Excise Duty

Buhari canvasses suspension of blanket Visa ban by UAE

*Says sector already overtaxed with 41 levies
*FG getting responsive to plights of individual sectors, says ALTON

By Prince Osuagwu, Hi-Tech Editor &Emmanuel Elebeke

After six months of intense deliberations with the telecommunications industry stakeholders, the federal government has finally exempted the telecom sector from the five percent excise duty approved in 2020 to be paid by all sectors of the economy.

Federal government said it was convinced that including the sector in the Excise Duty will bog down the activities of the sector which was already grappling with over 41 taxes and levies already.

Federal government relied on the reports of the Presidential Committee on review of Excise Duty in telecom sector, which discovered that the sector was already overtaxed.

The Association of Licensed Telecom Operators in Nigeria, ALTON has already commended the government for the incisive decision saying it has shown positive response to the plights of individual sectors of the economy.

The new five per cent Excise Duty is part of the new Finance Act signed into law by the President in 2020.

It is meant to be collected by the Nigerian Customs Service, and President Buhari had given directive that it be enforced on all telecoms service providers in the country on all local and foreign goods and services.

The Minister of Finance, Budget and Planning, Mrs Zainab Ahmed, had urged stakeholders to support the implementation, saying the decision was informed by the dwindling revenue of the federal government from oil and gas.

She said other countries in Africa, including Malawi, Uganda and Tanzania, among others, have all keyed into the revenue generation pattern.

However, in August last year when implementation of the duty gathered momentum, Minister of Communications and Digital Economy, Isa Pantami, took a swipe at Federal Government’s plans to impose five per cent excise duty on telecommunications services in the country.

He also vowed to use every legal instrument available to fight the decision as, according to him, the decision didn’t go through wide consultation, adding that if the decision was allowed to stand, it would affect the sector negatively.

The Minister argued that the sector which was already attracting huge revenue, creating jobs and adding huge revenue to the GDP, should not be over burdened with such taxes.

He said: “The 5 per cent excise duty will over burden the industry. As a Minister I was neither consulted nor received a memo to that effect. Even the relevant lawmakers that were supposed to be consulted have also told me they were not.

“Things are not done that way. Besides criticising the tax, we will take every legal measure to ensure the tax does not stand.”

The Minister’s attack on the excise duty also followed wide condemnation of the tax by major stakeholders in the sector, including the Association of Licensed Telecoms Operators of Nigeria, ALTON, Association of Telecommunications Companies of Nigeria, ATCON and National Association of Telecoms Subscribers, NATCOMS, which also kicked against the move, describing it as anti-people, provocative, strange, insensitive and irresponsible.

Eventually, in September 2022, the federal government suspended the duty for telecom sector and constituted a committee to look into the burdens of the sector with the intention to finding out if the 5 percent excise duty will frustrate the sector’s growth.

However, at a press conference in Abuja yesterday, Pantami broke the news that the federal government has finally agreed to exempt the sector from the excise duty.

The Minister said: “We converge today with regards to the assignment given to us by the President.    Historically, we had invited media on 5th  September 2022 and briefed  them after inaugurating the Presidential Committee on review of Excite Duty in telecom sector.

“Prior to that, there was  an  issue of 5% Excise Duty introduced  to the sector without following due process, which was part of requirements for a subsidiary legislation. I was not contacted and when it was announced, I personally challenged it and wrote  a letter to  the President on 12th  of August, 2022, demanding that the 5% duty be put on hold and also to set up a review committee to look into the issue critically and professionally and advise the President on best way to handle it.

“He gracefully approved the two prayers and directed me to chair the committee, among who was the minister of finance, Executive Vice Chairman of NCC, representatives of the telecom service providers, among others.

“After inauguration of the committee, the committee conveyed a stakeholders forum  on 5th  September 2022 and the committee was directed to incorporate other people that will add value to the work, which it did. On 14th  December, 2022 another issue concerning the 5% excise duty came up in which I spoke against it and justified my stands in writing. I insisted that within the telecoms sector, there are 41 categories of charges and levies and so, there is no justification to add more burdens on a sector that is already doing well, contributing so much to the economy.

The Presidential Committee completed its work in first week of February, 2023 and invited other stakeholders before submitting its report. After a review, the committee argued there was no need for Excise Duty in the ICT sector, paying 41 categories of charges and levies; that the sector has been contributing significantly to the economy. We cited two countries in Africa that increased their excise Duties for their ICT sectors that led to the death of the sector in both economies.

“Thirdly, the committee argued that the sector has set unprecedented record in terms of contribution to FDP. In Q1 2021, ICT sector alone contributed 14%    to GDP, in Q2 2021 the sector contributed 17,9%, in Q2 2022 sector contributed 18.44%    and in 2020, 2021 and 2022, the sector was rated the fastest growing sector without any subsidy, while other sectors even with subsidies were not doing well.

“In furtherance of the justification of the position, the President had in 2022 directed Office of the Secretary to the Government of the Federation, SGF to invite two international firms to evaluate the whole ministries and agencies, which KPMG and Foreign Commonwealth and Development Office were among. At the end, the final report presented in October, 2022, out of 8 areas of evaluation, the ICT sector increased revenue generation by 594% and  government revenue increased from N41bn quarterly to 408bn.

“So, the position of the committee is that the ICT sector is already contributing more than enough to the economy and so, other sectors which have not been contributing should be encouraged    to do same.

“WE have observed also that all other sectors have been increasing their goods and services except ICT sector. As at Oct. 2022,  average price of GB was reduced from N1200 to N300. It becomes the only sector that reduced prices by 80%.    Only one company in the ICT sector use 32,000 generators and consume one million litres of diesel every day. My argument is that the current economic situation in the country does not favour  increase of Excise Duty,” he added.

Earlier in his remarks, the Executive Vice Chairman of the Nigerian Communications Commission, Prof. Umar Danbatta said the outcome of the Presidential review Committee on Excise Duty is one of the major steps in sustaining growth in the nation’s telecom sector.

He applauded the Minister and President for the initiative.

Also, Chairman of ALTON, Engr Gbenga Adebayo told Vanguard that the exemption is a major achievement championed by the Minister of Communications and Digital Economy for the sector and applauded the government for listening and acting on the plights of the sectors of the economy.