By CHARLES IKE-OKOH
WED, 17 AUGUST 2016-Intended to provide the federal government an alternative source of revenue amidst the dwindling receipt from crude oil, the introduction of a new tax law, the Communication Service Tax 2016, CST, has instead alarmed the country’s industrialists and raised fundamental questions about the country’s tax processes.
The controversial draft piece of legislation before the Nigerian Senate seeks the imposition a 9% tax on electronic communication service fee charged by service providers.
The Lagos Chamber of Commerce and Industry, LCCI, hinted in their most recent response to the Bill that it is likely to face a raft of legal challenges besides the vocal criticism from Nigerians since the bill was first presented to the Senate.
The Bill was earlier in the year dismissed by PwC tax analysts as ‘’Cut and Paste” because, according to them, “the Bill seems to mirror the Ghana Communication Service Act. The reference in the Bill to National Health Insurance Levy, which is not applicable in Nigeria, shows that the Bill was perhaps developed through a direct cut and paste approach”
Debate about the communication Bill has echoes of a similar policy which sought to tax luxury goods and which drew so much scorn for its lack of clarity.
The LCCI suggests that the biggest challenge to the law will come from the contempt Nigerians holds for any tax perceived as double taxation and they believe that the CST potentially creates and raises the issue of double taxation since the value added tax, VAT, act already imposes tax of 5% on the supply of goods and services which includes telecommunications services.
Service providers who spoke to G&BJOURNAL say multiple taxation already exists including tax on profits, tax an annual turnover and VAT on consumption which weighs heavily on their bottom-line.
Like the luxury good tax, the LCCI pointed out what it calls the ambiguous and contentions provisions in the Bill which includes tax recoverable even on illegal activities included in Sections 3 (2) and 8 (2) of the Bill, the provision of “adequate” Security for Revenue on the request of the Minister or Federal Inland Revenue Service, FIRS in Section 15 (3) and giving third party monitoring agents and consultants unfettered access to network nodes of the service provider in Section 15 (4).
“This creates potential danger and possible infringement on the right to privacy of Nigerian citizens guaranteed under Chapter IV of the Nigeria Constitution which cannot be ignored.”
LCCI believe service providers network security can be compromised, abused or sabotaged notwithstanding the attempt by the drafters of the Bill to limit access (from electronic communication traffic) and they say the Bill does not provide for penalties for abuse or data protection violation by the government monitoring agents.
The Bill which analysts say could impose significant compliance and costs burden on the service providers was also dismissed for its vulnerability to cyber security attacks.
LCCI in a note made available to G&BJOURNAL say they believe that the CST would discourage investment and impede development in the sector, limit access to telecommunication services, affect and may reduce social inclusion of low income earners and make financial services inaccessible to the unbanked, create ripple effect on other sectors; agriculture, education, health, E-commerce as well as create adverse effect on broad and ICT penetration in Nigeria.
The Chamber believe also that the Bill negates the ‘the principle of neutrality.’
“Taxes should be economically neutral and equitable. It should not induce taxpayers to change their behavior in response to the tax [except in special cases such as when government wants to discourage activity in a particular sector]. The CST Bill would make communication services more expensive and this would affect consumer behaviour with respect to the demand and supply of these services,” the Chamber noted.
The 9% CST as designed will be charged on users of communication services, and that includes for voice calls, SMS, MMS, data usage and pay per view TV. Penalty for default is N50,000 and a further penalty of N10,000 for each day the return is not submitted as well as monthly interest rate of 150% (with additional interest of 150% if default continues) of the average of the prevailing commercial banks’ lending rate as published by the Central Bank of Nigeria, CBN.
