Telecommunications groups have rejected the proposed bill for the establishment of a tax on electronic communication services in Nigeria.
In a letter addressed to Minister of Finance and her Communications counterpart, the groups which include, GSMA the industry association representing mobile operators worldwide; ALTON, representing the mobile operators of Nigeria; ATCON, the Association of Telecommunications Companies of Nigeria and NATCOMS, the National Association of Telecommunications Subscribers, expressed their grave concerns regarding the proposal, which is under consideration by the National Assembly.
The bill seeks to establish a 9% Communication Service Tax to be levied on charges payable by a user of an electronic communication service (i.e., SMS, voice calls, MMS, data usage) supplied by service providers.
According to the group, ‘If introduced, such tax will result in an increase in prices for consumers, which will have adverse impacts on the adoption of mobile services and industry investment, as well as counter-productive to the longer term national digital strategy objectives set by the government of Nigeria.
They further stated that: “the socio-economic impact of mobile penetration is now widely recognised. According to research conducted by the World Bank, a 10% increase in mobile broadband penetration in low to middle income countries leads to a 1.38% increase in GDP growth.
Today, 83 million people in Nigeria have access to mobile services. With over half of the population without a mobile connection, affordability remains a key challenge to connect the unconnected, who are typically lower income population groups.
Further taxation on electronic communication services will hit lower income consumers the most, who are already struggling due to the adverse economic situation and increased price pressure and for whom affordable access to information and communication technology is critical to their social and economic inclusion. Moreover, this will result in a double taxation for consumers who already pay Value Added Taxes on telecommunications services.”
They added that in 2014, the mobile ecosystem contributed USD8.3 billion to the Nigerian economy. This they said is set to increase as penetration of voice and broadband services grows.
The group noted that the proposed tax will have adverse effect on the industry investment needed to improve and expand mobile connectivity across the country.
“Mobile industry investment in Nigeria is already constrained by multiple level of taxes and fees set by local and regional authorities, in addition to fees to the national telecommunications regulator and high costs of right of ways. In a context of declining average revenue per user, this can make it more difficult for mobile operators to make a business case for investment.
“The proposal would also further increase the administrative cost burden on service providers to comply with numerous and complex tax regulations, already high compared to other countries. In view of the above, we respectfully request your urgent intervention to prevent the adoption of a new tax on electronic communications services. We remain available to meet with you to progress dialogue and to ensure the digital economy delivers its full potential in Nigeria”