ATCON Visits Saraki, Warns of Dangers of ICT Tax Bill

Association of Telecommunications Companies of Nigeria (ATCON) has again warned that the proposed plan by the federal government to impose a special tax of nine per cent for the use of communication services would only succeed in worsening the prevailing high cost of doing business in the country.

The group during a visit to Senator Bukola Saraki, President of the Senate, asked the federal government to drop the plan to tax every phone call made, text message sent and data used by Nigerians.

According to ATCON, the bill potentially creates and raises the issue of double taxation since Value Added Tax (VAT) Act already imposes tax of five per cent on the supply of goods and services, calling for the suspension of the bill to allow for the rapid growth of the telecommunications sector in line with the Nigerian National Broadband Plan.

A member of the ATCON delegation told Nigeria CommunicationsWeek that the visit was part of the Association's advocacy against the 9% Communication Services Tax Bill already considered for passage at the Upper Chamber.

"ATCON", the source said, "has not shifted ground on its position against the Communication Services Tax Bill. As an industry, we are strictly against the moves by the Federal Government.

"During the meeting, the ATCON President presented our case to His Excellency, Dr. Bukola Saraki, saying, look the growth of Information and Communication Technology during the last few years has been phenomenal and tremendous with positive impact on every aspect of human life, however, the industry which is heavily taxed already would prefer this Bill is not passed.

“There is no doubt that the emergence and liberalization of this sector has also impacted positively on revenue accruable to government , employment generation (both Direct and Indirect), Foreign Direct Investment (in tens of billions of dollars) and a host of other positives which time would not permit me to mention. What the industry needs now are more palliative and not more tax. It's true government is looking for measures to generate more revenue, but this tax is not a better option."

Before now, ATCON's position has been that they recognize that, generally, taxation is one of the many ways through which governments all over the world generate income to be able to discharge their duties to the citizens, “Government at all levels make collections of taxes mandatory through enactment of policies. The contributions of the Communications sector was meagre some fifteen years ago but through the concerted efforts of some patriotic and dedicated experts in the telecommunications sector under the aegis of the Association of Telecommunications Companies of Nigeria who advocated for the liberalization of the sector, the sector is now contributing revenue of well over 10% to the nation’s GDP.

“ATCON believes any calculated actions that have potentials to stifle further contribution of the telecoms industry to our GDP must be avoided by all tiers of government in Nigeria as the perceived benefits of imposing a Communication Service tax on telecoms subscribers has the potential to erode if not destroy the achievements that have been made since the telecoms sector was liberated. We therefore advise both the House of Representatives and the Senate (the Legislative arm of government) to discontinue with the bill.            

Also recently, Telecommunications groups which include, GSMA the industry association representing mobile operators worldwide; ALTON, representing the mobile operators of Nigeria; ATCON, the Association of Telecommunications Companies of Nigeria and NATCOMS, the National Association of Telecommunications Subscribers, expressed their grave concerns regarding the proposal, which is under consideration by the National Assembly.

The bill seeks 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.

According to the group, ‘If introduced, such tax will result in an increase in prices for consumers, which will have adverse impacts on the adoption of mobile services and industry investment, as well as counter-productive to the longer term national digital strategy objectives set by the government of Nigeria.

They further stated that: “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.  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.”

They added that in 2014, the mobile ecosystem contributed USD8.3 billion to the Nigerian economy. This they said is set to increase as penetration of voice and broadband services grows.

But, in a recent public forum in Lagos the federal government through Barrister Adebayo Shittu expressed hopes to generate more than N20bn monthly from communication service tax.

The Minister said, “We all know that the introduction of new taxes without harmonising existing ones will put pressure on the Nigerian tax system, making it unattractive to investors. “This may also be counter productive in the long run for our target broadband penetration.

“My focus on any tax regime will be to align any process that will stimulate the economy and also ensure that tax system is sufficient by widening the tax net and creating an effective framework for tax compliance to protect the poor and vulnerable in the society.”

Efforts to reach the ATCON President proved abortive however the executive secretary confirmed the visit, but said that a comprehensive report shall be made available later.