ABUJA, AUGUST 26, 2016 – The proposed introduction of 9 per cent tax on calls, MMS, SMS, data and others by the federal government is most unwelcome.The Communication Service Tax (CST bill) which seeks to levy nine per cent on subscribers for the use of the various communication services will be an overkill especially now the economy has gone from bad to worse.
This is not an economy that can afford even marginal increases in anything.
Already, ICT firms are dying by instalment.
Just imagine that three years ago, there were 35 licensed telecoms companies comprising some small players, those in the fixed line, Code Division Multiple Access and Global System for Mobile communications players that were doing well.
Today, that figure has come down drastically with just about 15 licensees still operating.
As rightly admitted by Adebayo Shittu, minister of Communication, the introduction of new taxes without harmonising existing ones would put pressure on the country’s tax system thereby making it unattractive to investors.
It may also be counter-productive in the long run for the country’s targets on broadband penetration.
Right now, multiple taxation is a major impediment to the growth of the Information and Communications Technology (ICT) sector.
Various tiers of government, including local councils and state government agencies have created enormous challenges to the sector and some of the agencies often threaten to shut down base transceivers stations over alleged refusal of the Telecoms’ companies to comply with a tax regime which the operators see as grossly excessive.
The bill which copied extensively from Ghana Communication Service Act without taking into account the country’s peculiarities imposes significant compliance burden and costs on the service providers.
As observed by PwC, the Bill does not provide for penalties for the Government monitoring agents for abuse or data protection violation.
Confidentiality of the customers using the infrastructure has to be guaranteed and any consequential claims for damages should be borne by such agents or government officials.
The Bill does not clarify whether there will be a charge if the subscriber of the telecommunication or television service is outside Nigeria or for foreign interconnect charges billed from Nigeria to foreign telecommunication providers.
The 7 days period for service providers to object to a request by the Government to introduce an equipment or software into the subscriber’s network may not be sufficient to determine the risk associated with such interference as this may require technical expertise at a significant cost and time.
The CST Bill still imposes the payment of 5% of annual revenue tax after a court upholds the introduction of the Government monitoring equipment into the network.
This will discourage service providers from challenging the Government where it merely suspects that such introduction may create risks and affect the quality of service enjoyed by subscribers. Interestingly there is no compensation to the service provider where the court rules otherwise.
The use of independent consultants could lead to unprofessional behaviour by consultants/agents who are motivated solely by commission for work done.
The only rational thing to do is for government to discontinue the Bill, knowing that it would reduce the inflow of FDI into the sector, reduce subscribers level of data consumption and affect contribution of the sector to GDP.
