Telecom subscribers in the country are likely to pay an additional N261.18bn on voice calls, short message service and data in one year if the Senate passes the proposed Communications Service Bill into law.
The bill, sponsored by Senator Ali Ndume from Borno South, aims to charge nine per cent on communication services and pay-per-view TV services.
Ndume noted that the bill, which had passed the first reading at the upper chamber of the National Assembly, would impose levies on electronic communication services like voice calls, SMS, data usage – both from telecommunication services providers and Internet service providers and pay-per-view TV services.
Meanwhile, network operators under the aegis of the Association of Licensed Telecommunications Operators of Nigeria pointed out that the proposed nine per cent tax would make communication expensive and in turn make life difficult for the average Nigerians.
The Chairman of ALTON, Gbenga Adebayo, said communication was presently one of the most affordable basic needs of Nigerians but cautioned that the proposed increase was offensive and would make it inaccessible to many.
In fact, the bill specifically stipulated that the subscribers would be liable for the payment of the tax.
Section 2 of the bill reads, “The tax shall be paid together with the Electronic Communication Service charge payable to the service provider by the consumer of the service.
“The tax is due and payable on any supply of Electronic Communication Service within the time period specified under sub-clause (5) of whether or not the person making the supply is permitted or authorised to provide Electronic Communication Services.”
The latest monthly subscribers’ data obtained from the Nigerian Communications Commission indicated that the number of active subscribers to mobile services in Nigeria through the four network operators stood at 176.62 million as of August 2019.
MTN leads the industry with 65.71 million active subscribers, followed by Airtel with 47.92 million, Globacom has 47.27 million, 9mobile has 15.6 million and Visafone spectrum owned by MTN has 119,386 customers.
According to the data obtained from the NCC, in the year ended December 2018, the total outgoing mobile-to-mobile minutes of calls from MTN, Globacom, Airtel, 9mobile, Smile and Ntel was 114.20 billion minutes.
Analysis, however, showed that at an average of N24 per minute, offered by the network operators, subscribers in the country spent N2.74tn on calls within one year.
But, with an additional nine per cent tax on voice calls, if the bill is passed into law, subscribers may have to spend about N246.67bn more on voice calls only, because according to analysts, operators would eventually pass the increase to the final consumers.
The analysis showed that MTN subscribers may have to pay N29.43 as against N27/min; 9mobile subscribers may have to pay N32.7/min as against N30/min; Airtel users may have to pay N32.7 as against N30/min, and Glo subscribers may have to pay N7.2/ min as against N6.6/min.
The 2018 industry data from the NCC showed that the total volume of SMS sent in the year ended December 2018 was 9,565,167,407, which implied that subscribers paid N38.26bn for SMS in the 12 months, at N4 per SMS.
With an additional nine per cent tax on SMS, subscribers will spend about N3.44bn more on messages as the unit cost of SMS could rise to N4.36 to enable network operators to remit the nine per cent tax to the government.
Also, NCC statistics showed the total number of international SMS sent through the four mobile network operators, including Smile and Ntel, in the previous year was 51,534,609.
At N15/international SMS, subscribers, therefore, spent N773.02m. Thus, if the nine per cent tax is imposed on international SMS, subscribers are likely to pay N69.57m more as the tariff could rise to N16.35 per international SMS.
Industry data also indicated that 188,012,210 outgoing mobile roaming minutes were recorded in the previous year, at an average of N288 per minute, which was responsible for the N54.15bn subscribers spent on roaming the previous year.
With a nine per cent tax, the international call tariff may rise to an average of N314 per minute to make allowance for the nine per cent tax the network operators would remit to the government. Thus, subscribers may likely spend about N4.87bn more on international calls.
In terms of data, the total volume of data consumed by subscribers in the year ended December 2018 was 68,154.12 terabytes. This indicated that subscribers spent N68.15bn on data services last year, at an average of N1,000 per gigabyte of data.
Thus, if the proposed nine per cent tax is implemented, subscribers would pay additional N6.13bn, on data.
As of August 2019, the telecom industry has a total of 122.59 million active mobile Internet users from the four mobile network operators.
MTN also leads with 51.6 million Internet users, followed by Airtel with 32.75 million Internet subscribers. Globacom has 29.52 million mobile Internet customers on its network; 9mobile has 8.63 million while subscribers on Visafone spectrum belonging to MTN amounted to 83,482.
Speaking on the planned increase, the ALTON chairman said, “The bill is badly intended for the industry at a time when we are talking about the availability and accessibility to telecom services.
“If that bill is allowed to be passed into law, it will deny people access to these services and reduce the value of their recharge. Also, the terms of the bill, which we haven’t seen, may lead to significant compromise of people’s privacy because the way by which the collection of the money will be made may require the government to have access to the servers of the operators.”
Adebayo, therefore, called on the Senate to reconsider the proposed tax, adding that it was contrary to the purpose for which they were elected to office.
The President, Association of Telecommunications Companies of Nigeria, Olusola Teniola, also urged the government to consider a reduction in the cost of governance, instead of imposing the tax.
He expressed concern that the CST Bill, which was copied from Ghana, was being promoted at the National Assembly without due consultation with all stakeholders in the telecom and ICT sectors.
He said, “The levy will be either inclusive of the tariff or it will be added on every recharge. It will also apply to subscribers of pay-per-view TV. This tax will have a serious impact on spending because the people who ordinarily have been able to afford services will no longer be able to because it will be more expensive.
“It will have a ripple effect on the economy, Gross Domestic Product and telecom revenue. Productivity will reduce because it will be more expensive to make calls and enjoy other communication services. Nigeria has one of the highest numbers of taxes paid. This is just another additional burden on consumers. It is totally wrong.”
Speaking on the impact on the subscribers, the President, National Association of Telecoms Subscribers, Chief Adeolu Ogunbanjo, condemned the proposed tax, noting that it would impoverish more Nigerians and increase the rate of unemployment in the country.
He said, “It will impoverish Nigerians. Did you know that on every recharge card that you buy, you pay five per cent Value Added Tax on it already?
“There are so many taxes being paid by the telecom companies. These taxes are about N450bn annually, apart from the VAT. Why does anyone in Nigeria want to introduce additional taxes in a sector that is bedevilled by multiple taxes?”
Also speaking on the bill, The President, Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture, Alhaja Saratu Aliyu, said even though the association understood government’s need to boost internally generated revenue to fund the budget, the economic growth rate was still too fragile.
She added, “Government should abstain from any policy that will negatively affect the production capacity of the economy at the risk of another recession. It is our position that an increase in tax rate (VAT, communication or otherwise) will negatively impact cost of production, price levels and consumption levels.
“We advocate that all policies to increase IGR be focused on widening the tax net or increasing the tax base, increasing production by increasing employment while maintaining current tax rates. We advocate that all policies to increase IGR be focused on widening the tax net as being done by the FIRS.”
Ndume had said the bill was to provide for Communication Service Tax as a veritable tool for economic diversification and for related matters.
Speaking to journalists during the week, he said the tax would encourage wealth distribution in ways that would not affect the ordinary citizens, noting that the proposed increase in Value Added Tax by the government would have a negative effect on the economy as it would not only affect the prices of goods and services but take them beyond the reach of the common man.
Meanwhile, section 1 of the bill reads, “There shall be imposed, charged, payable and collected a monthly Communication Service Tax to be levied on charges payable by a user of an Electronic Communication Service other than private Electronic Communication Services.
“The tax shall be levied on Electronic Communication Services supplied by service providers. For the purpose of this clause, the supply of any form of recharges shall be considered as a charge for usage of Electronic Communication Service.
“The tax shall be levied on the following Electronic Communication Services: (a) Voice Calls; (b) SMS; (c) MMS; (d) Data usage both from Telecommunication Services Providers and Internet Service Providers; (e) Pay-per-View TV stations, etc.”