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Nigerian government suspends 5% telecoms tax

President Bola Tinubu has suspended the implementation of 5% excise duty on telecom services to address business unfriendly fiscal policy measures and multiplicity of taxes.

Nigerian government suspends 5% telecoms tax
Bola Tinubu, President of Nigeria 

In 2022, the federal government of Nigeria disclosed that telecommunications subscribers would pay a 5% excise duty on calls, SMS and data services as part of the 2023 Fiscal Policy Measures and Tariff Amendments.

At the time, former finance minister, Zainab Ahmed disclosed that the 5% tax will be added to the already existing 7.5% Value Added Tax (VAT) on telecom services. "It is public knowledge that our revenue cannot run our financial obligations, so we are to shift our attention to non-oil revenue," she said, justifying the reason for the tax.

However, telecom operators kicked against the implementation of the 5% tax. According to the executive secretary, Association of Telecommunications Companies of Nigeria (ATCON), Ajibola Olude, "the proposed excise duty on all telecommunications companies is badly intended by the Ministry of Finance. And the current state of Nigerian communication is so bad that only about 756 Internet Service Providers (ISPs) were registered but only 10 are active because of issues with forex."

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Normally, excise duty is applicable on beer and stout, wines, spirits, cigarettes and homogenised tobacco manufactured in or imported into Nigeria at 20%. With the Finance Act 2022, Nigeria introduced excise duty on non-alcoholic beverages including telecommunication services.

Aside from ATCON, the former minister of communications and digital economy, Isa Pantami also kicked against the tax. He further received the approval of former president, Muhammadu Buhari to suspend the tax awaiting the findings of the Presidential Committee on Excise Duty for the Digital Economy Sector.

"It is my responsibility to ensure we are just and fair to the operators, government and most importantly the consumers. Recently, it was announced that excise duty will be introduced in the telecom sector, I rejected that wholeheartedly because excise duty was usually fixed on luxury products," he said. "As of today, the ICT sector is overburdened by so many categories of taxes to the extent that there are 41 categories of taxes at the federal and state level, particularly in the telecom sector."

In line with Pantami's comment, President Bola Tinubu on Thursday ordered the suspension of the 5% excise duty on telecommunications. This comes after the signing of four executive orders into law to curb arbitrary taxation policy in the country.

One of the Executive Orders signed into law by the President is the change in the date of the implementation of the Finance Act, 2023. The President deferred the commencement date of the changes contained in the Act from May 23, 2023, to September 1, 2023. This is to ensure adherence to the 90 days minimum advance notice for tax changes as contained in the 2017 National Tax Policy.

"The Excise Tax of 5% on telecommunication services has generated heated controversy. There is also a lack of clarity regarding the status of this tax, just as players in the sector also complain about the imposition of multiple taxes on their operations," says Dele Alake, special adviser on special duties, communication and strategy, to the President.

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