Amid ongoing economic difficulties in Nigeria, Telecommunication service customers might soon face extra financial pressure, as the Federal Government is reviving efforts to implement a five percent excise levy on all telecom services providers. This levy will apply to calls, text messaging (SMS), and data services, indicating a likely cost increase for mobile users nationwide. The suggested Tax encompasses gaming, gambling, betting, lotteries, and telecommunications. This development is part of reforming the national tax system.
Also, the revised policies are included in Legislation titled “A Bill for an Act to Repeal Certain Acts on Taxation and Consolidate the Legal Frameworks relating to Taxation and Enact the Nigeria Tax Act to Provide for Taxation of Income, Transactions, and Instruments, and Related Matters.” It is dated October 4, 2024, and was recently obtained from the National Assembly. It reveals a further expansion of the scope of excise duties. Services enjoyed by millions of citizens are expected to see an increase in costs as the legislation’s review indicates a plan to impose excise taxes on telecommunications services and entertainment activities nationwide.
Both postpaid and prepaid telecom services under NCC will face a 5% tax.
Therefore, the proposed bill indicates that service providers’ fees for these services, whether received in cash or alternative forms, will be subject to excise tax. Under the bill’s guidelines, both postpaid and prepaid telecommunications services regulated by the Nigerian Communications Commission (NCC) will be liable for a five percent tax, along with sectors involved in gaming, gambling, betting, and lotteries. The government’s strategy behind this move appears to be driven by the need to generate non-oil Revenue in response to increasing fiscal pressures.
With the telecom and betting sectors experiencing rapid growth in recent years, authorities see an opportunity to tap into these industries to enhance the national revenue base. However, the telecom sector, an essential component of modern life, is mainly in the spotlight. However, industry stakeholders have voiced dissatisfaction with the suggested tax, arguing that many existing taxes already burden the industry. In addition, it aims to oversee currency exchanges by implementing rules that mandate any disparities between the exchange rate designated by The Central Bank of Nigeria (CBN) and the actual market rate to subject excise duty. This measure ensures transparency in currency exchanges while aligning these transactions with official CBN rates.
Despite past suspension efforts, the government revived the plans.
On the other hand, the objective is to streamline and refine current legislation while ensuring compliance and increasing revenue. This proposal promotes a self-evaluation framework, compelling companies to disclose and remit levies on additional charges from currency transactions. This situation recalls an earlier government effort to introduce a comparable levy in the telecommunications industry. Looking back, the former Minister of Communications and Digital Economy stopped a suggested excise tax on telecom services. This decision followed his expressions of worry regarding the excessive taxation burden on the sector, pointing out the various taxation levels encountered by telecom providers.
He also directed the creation of a committee to review the situation and provide recommendations carefully. However, despite the temporary relief for telecom customers in the last two years, the Ministry of Finance and the Nigerian Customs Service announced their intention to implement the levy of excise duty on telecommunication services and beverages in 2023. This push is now being reinforced through the newly proposed bill, indicating the government’s continued determination to pursue this tax as part of a fiscal strategy.
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As the legislation moves forward, it is clear that the government views the excise duty as a necessary tool to enhance revenue collection from the expanding industry in the region. With the potential for increased costs on everyday services like calls, data, and SMS, many people may need to brace themselves for higher expenses, while businesses in the Gaming and betting industries are likely to feel the impact as well. As the nation’s fiscal pressures mount, the government is seeking innovative ways to expand its revenue base, and this new tax regime is a key part of that effort.