The Federal Government has approved the exemption of the telecom sub-sector of Nigeria’s Digital Economy Industry from the five percent excise duty. This decision is in accordance with the recommendations of the committee formed to examine the appropriateness of the duty to the telecom industry, which is widely regarded as being subjected to an excessive number of taxes and other levies. Prof. Isa Ali Ibrahim Pantami, Minister of Communications and Digital Economy, made the announcement in Abuja on Tuesday during a press briefing on an update of the proposed duty.
After opposition from the Minister in August 2022, President Muhammadu Buhari halted the five percent excise duty on the telecommunication sector and constituted a Presidential Review Committee on Excise Duty in the Digital Economy Sector to examine the issue further. Prof. Pantami, who served as the committee’s chair, said that his group had completed its national assignment and sent a report to the President outlining the reasons why the telecom industry should be free from any new taxes.
Telecom sector remained one of the most important contributors to GDP.
According to Reuben Muoka, Director of Public Affairs at the Nigerian Communications Commission, the Minister said that the Committee’s findings could be summed up in three grounds explaining reasons against the proposed levy on the telecom industry and to avoid a fall in the amount of contribution activities the sector is making towards the development of the country’s economy. On the first ground, operators in the digital economy’s telecommunications sub-sector currently pay no less than 41 distinct kinds of taxes, levies, and charges.
Secondly, in terms of GDP, the telecommunication sector has remained one of the most important contributors to the Nigerian economy (GDP). Finally, the fact that the telecom industry is the only one whose service prices have remained consistent despite a general rise in the cost of all sources of production across all sectors was taken into account in objecting to the excise charge. Even in most circumstances, the cost of service in the telecom industry has continued to decrease during the last several years.
Increased tax on the sector would exacerbate Nigerians’ hardships.
Prof. Pantami claimed that the President exempted the telecom industry from paying the excise charge considering the Committee’s recommendation and relied on the provision of Section 5 of the Nigerian 1999 Constitution, as amended. The president also leverages superior constitutions making it possible for him to grant an exemption of the excise duty, which is otherwise required under the Finance Act of 2021 and other subsidiary legislation. He said that the increased tax on the sector would exacerbate Nigerians’ hardships, and he thus advises that underperforming sectors be pushed to do more while paying the 5 percent excise duty.
He also reassured telecom users that the incoming government would uphold the president’s decision to waive duties on the telecom industry, noting that the decision was made for the sake of the country and its people rather than to benefit any one political party or administration. The Minister further stated that the Digital Economy Sector has been making a major contribution to the growth of the Nigerian economy, citing its 14.07% contribution to GDP in the first quarter of 2020, 17.79% in the second quarter of 2021, and 18.44% in the second quarter of 2022.
Quarterly income jumped from N51 billion to over N480 billion.
In addition, he said that the industry’s quarterly income to the government has jumped from N51 billion to over N480 billion, an increase of 594 percent. Notwithstanding the rising cost of operations, such as the energy crisis that has prompted mobile network operators to power base stations with over 32,000 power-generating to give flawless services to its teeming clients, the price of purchasing data has decreased from N1,200 in 2019 to N350 at present.
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