Mixed Reactions Trail 9% Telecom Tax

telecomThe proposed nine percent Communication Service Tax (CST) Bill by the Federal Government has attracted a lot of criticisms from discerning Nigerians who have argued that the new policy regime may not be in their best interest after all.

For most Nigerians who are trying very hard to adjust to the excruciatingly biting economic crunch, the proposed nine percent Communication Service Tax (CST) Bill by the Federal Government has been viewed as a bitter pill too difficult to swallow.

The issue is that the proposed private-member Bill, titled ‘Communication Service Tax Bill (“CST” or the “Bill”) 2015, seeks to impose, charge and collect communication service tax and will be levied on service fees payable by users of electronic communication services.

Specifically, the services that would be grossly affected by the new policy regime are voice calls, SMS, MMS, data usage, internet services, pay TV to mention just a few.

Justifying the need for the proposed bill, the Minister of Communication, Mr. Adebayo Shittu has hinted that its implementation will attract about N20billion to the government on a monthly basis, a development, government apologists believe, is a most welcome relief at this point in time.

Already, the bill has passed first reading at House of Representatives.

The CST rate, proposed at nine per cent, is seen by economic watchers as part of the new measures the Federal Government has devised to address the low financial receipts occasioned by the fall in the international oil price and value depreciation of the naira.

Giving insight on the current position of the sector, the National Chairman of Association of Licensed Telecommunications Operators of Nigeria, Mr. Gbenga Adebayo, said despite the growth already recorded in the industry, telecoms operators continue to face challenges emanating from recurring taxations and the regulatory environment.

Going down memory lane, he recalled that three years ago, there were 35 licensed telecoms companies comprising some small players, including those in the fixed line, Code Division Multiple Access and Global System for Mobile communications players that were doing well but have since gone underground.

“Today, that figure has come down drastically, as we now have just about 15 licensees still operating and this tells you that something is not going well,” he lamented.

Besides, in the view of industry players, the country may lose about 25 percent of licensed operators if the bill is passed into law.

A staff in one of the telecoms firms confided in The Nation that a study conducted by the regulatory department of his company revealed that no fewer than 25 percent of the existing licensed operators would cease operating in the country one year after the CST bill is passed.

“If the new policy kicks off, then the Federal Government should be prepared for the worse because so many Nigerians will be rendered jobless. It will be too bad for the telecoms sector that is currently seen as one of the highest employers of labour,” the source said.

The ALTON boss, while validating what the telecoms staff said, emphasised that the loss of about 20 operators, representing about 57 percent, within a space of three years has been traced partly to the problem of regulatory environment, where there are multiple regulations and imposition of all kinds of taxes on the operators from the federal, state and local levels.

“The fact that, as operators, we are still confronted with willful and non-willful damage, arising from insecurity in the past years, multiple taxation, especially the Right of Way charges and attendant problem of indiscriminate shutdown of telecoms infrastructure, among others, suggests that regulations in the industry remain unfriendly with varying degrees at different levels of government.”

He said that the RoW in most states remained exorbitant as government agencies, especially at the state and local levels, continued to perceive telecoms as ‘cash-cow.’

“It is only in Lagos now that we have been able to achieve better understanding from the government. For instance, Lagos State Government, having realised the great impact pervasive deployment of telecoms infrastructure and unhindered access could have on the state’s Gross Domestic Product, three years ago, crashed RoW tax to N500 per metre.”

Expectedly, not a few Nigerians have expressed worries over the planned imposition of the communication tax, describing it as anti-masses.

One of those who holds the view and very strongly too that the government doesn’t mean well for the masses as far as the bill is concerned is the Socialist Party of Nigeria (SPN).

In a statement issued by Comrade Chinedu Bosah, its National Secretary and made available to The Nation over the weekend, the party said the bill is wittingly and consciously promoted by the Federal Government to attract more revenue for the government at the expense of the suffering vast majority of Nigerians.

In the statement which reads in part, the SPN said: “Imposing more tax on the people is one of the attacks the ruling class will unleash aside other neo-liberal and anti-poor policies such as devaluation of Naira, removal of subsidy, cut in social spending, deregulation, privatisation etc.”

It further noted that: “Already, subscribers pay five per cent Value Added Tax on all communication services and this new tax if implemented will jerk up the tax to 14percent. This regressive taxation will obviously reduce the level of communication, further erode the purchasing power of the working masses and compound the economic crisis. Palliatives that the Federal Government promised after removal of subsidy on petrol was a ruse and the aftermath events have shown that more attacks on the living standard of the working masses will be rolled out one after the other.”

Miffed by what he described as insincerity of purpose on the part of the Federal Government, the SPN scribe said, the government claimed that it is aiming for 30 percent penetration in broadband by 2018 whereas paltry budgetary allocation, domination of private/profit interest in the communication industry and regressive taxation will not only undermine such target, it will continue to erode effective communication.

“In the same vein, the Buhari-led government claimed it is diversifying the economy towards agriculture whereas budgetary allocation to agriculture is N76 billion (a paltry N400 for every Nigerian) and that is 1.3 percent of the total budget in a country where 18,000 political office holders earn about N1.2trillion which is about 21 percent of the budget.”

The SPN, Bosah reiterated, “Is strongly opposed to this proposed communication tax on two reasons namely because the tax regressive and will further pauperise the working masses and poor. Hence, we demand that the proposed bill should be put to abrupt end. Such bill and policies will only be progressive if it is targeted at the rich who have capacity to pay higher taxation. The communication tax further violates the inalienable right of the people to freely communicate. What the Nigerians need is affordable and efficient communication.”

He therefore called on the organised labour including the Nigeria Labour Congress (NLC) and Trade Union Congress (TUC) to resist and defeat this bill by mass mobilisation and protests.

Echoing similar sentiments, in an interview with The Nation, the immediate past President of Association of Telecom Companies of Nigeria (ATCON), Mr. Lanre Ajayi, said the imposition of the bill now is untimely and will further impoverish Nigerians.

According to him, telcos are already overburdened with all kinds of taxes, the imposition of another one at this point in time will be most unfair.

By imposing numerous taxes, Ajayi said: “The government is indirectly killing the Nigerian economy, government should have a rethink about the imposition of the tax.”

The fears and worries expressed by stakeholders are genuine and understandable and so cannot be waived aside, Ajayi has stated.

According to him, the Association of Licensed Telecommunications Operators of Nigeria (ALTON), Association of Telecommunications Companies of Nigeria (ATCON) and the National Association of Telecommunications Subscribers (NATCOMS) have severely criticised the bill in a letter to the Minister of Finance, Mrs. Kemi Adeosun and the Minister of Communications, Adebayo Shittu. Telecommunications Association (GSMA), the umbrella body of mobile operators worldwide, also joined in solidarity through a letter, dated March 30.

But the question is, would the government be gracious enough to tarry awhile and put the much controversial bill on hold? Time will tell.

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