The Nigerian Communications Commission (NCC) has urged for the complete exemption of the telecom sector from paying excise duty, citing the essential and non-luxurious nature of its services.
Prof. Umar Danbatta, the Executive Vice Chairman of the NCC, made this plea at the Telecom Executives and Regulators Forum (TERF) organized by the Association of Telecommunications Companies of Nigeria (ATCON).
Danbatta acknowledged the recent suspension of the 5% excise duty on telecommunication services but stressed the industry’s need for a total exemption.
He mentioned ongoing discussions with the Minister of Communications, Innovation, and Digital Economy, Bosun Tijani, to address the sector’s tax concerns and secure its exclusion from excise duties.
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Key Points from the TERF
- Growing Taxation Burden: Danbatta highlighted the concerning rise in the number of taxes paid by telecom operators, increasing from 41 last year to 46 in the second quarter of this year.
- Exemption History: Initially, a 5% excise duty on telecommunication services was proposed, but the sector was already burdened with 41 different levies, taxes, and charges. While the exemption from excise duty was approved by the former President, Muhammadu Buhari, it reappeared in the Finance Act amended by the National Assembly.
- Industry Not Luxury: Danbatta emphasized that excise duties typically apply to luxury items, which telecommunication services are not. These services have become indispensable to the lives of over 220 million Nigerians and cannot be considered a luxury.
- Consumer Impact: Implementing the planned 5% excise duty would have placed a heavy burden on millions of subscribers, potentially making these essential services unaffordable for many.
- NCC’s Advocacy: The NCC is actively engaging with the minister to advocate for a complete exemption of the sector from excise duty. The suspension is appreciated, but a permanent exemption is sought.
In his remarks, Mr. Tony Emoekpere, the President of ATCON, stated that the primary goal of the Forum was to provide a platform for influential industry regulators to address crucial telecom sector issues. He stressed that multiple taxation is a significant obstacle facing the industry, and resolving these challenges would attract increased investments, ultimately fostering its growth.
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Challenges Posed by Multiple Taxation
- Increased Costs: Telecom companies face higher operating costs due to multiple taxation, impacting their profitability and resources for network expansion.
- Reduced Investment: High taxation discourages investment in the sector, hindering network expansion and technological advancement.
- Reduced Innovation: Excessive taxation limits funds available for research and development, slowing down the introduction of new services and technologies.
- Consumer Costs: Telecom companies may pass on the tax burden to consumers through higher tariffs and fees, potentially reducing affordability.
- Impact on Broadband Access: Multiple taxes can hinder broadband infrastructure rollout, limiting access to high-speed internet and economic development.
- Foreign Investment: High taxation can deter foreign investors, limiting competition and innovation.
- Compliance Challenges: Complex tax regulations create administrative burdens for operators.
- Economic Impact: The telecom industry contributes to economic development, job creation, and revenue generation. Excessive taxation can hinder these contributions.
- Uncertainty: Frequent changes in tax policies and multiple tax authorities create uncertainty for companies.
Conclusion
To address these issues, regulatory bodies like the NCC advocate for a fair and reasonable tax regime that supports the industry’s growth and sustainability while meeting government revenue needs.
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