Telecoms kick against communications service tax 

Major telecoms firms in the country have kicked against a bill seeking to introduce Communications Service Tax, arguing that such a tax will further suffocate subscribers, stall the deployment of infrastructure, frustrate the achievement of government’s National Broadband Plan, and make the government more unpopular.

The major carriers– MTN, Airtel, Glo, Etisalat and others- acting under the aegis of the Association of Licensed Telecoms Operators of Nigeria (ALTON), said instead of overtaxing the already impoverished subscribers, a good place to start will be to review and cut down the cost of governance at all levels, lamenting that the sheer magnitude of the effect of the law will be unimaginable.

“Our opinion is that the introduction and collection of the tax without the exclusion of the applicability of the Value Added Tax (VAT) (which was introduced by the Value Added Tax Act and is also applicable to services rendered by service providers in the telecoms sector) will amount to double taxation as the proposed tax is an additional tax on communication services rendered to the same end users who already pay a five percent tax as VAT.

“Also, the administration of this tax regime as proposed will be cumbersome and impractical; we must correct this general notion that service providers can absolve any tax without considering the capital and operational cost to the service providers,” the telcos said.

On the challenge of affordability in connecting the unconnected, the carriers said high consumer taxes on communication services would impact negatively on economic and broadband development.

“Today the country has more than 83 million unique subscribers, accounting for 45 per cent of the population. As well as providing access to financial services, education and healthcare to millions of citizens, many for the first time, telecoms has also played a critical role in reducing transportation, communication and transaction costs.

Pushing up the cost to consumers, this tax will inevitably adversely impact the adoption of broadband affordability, which is a key challenge in connecting the unconnected

The operators say the tax will have adverse impact on telecom infrastructural development as it will negatively impacting take-up of consumer services and decline industry revenues.

The proposed tax will reduce the incentive for telecom operators to invest in the infrastructure improvements that are essential to improve and expand mobile/broadband connectivity across Nigeria; telecom industry investment in Nigeria is already constrained by multiple taxation and may not have room to contain the tax, the carriers said.

According to the group, there are 26 different taxes and fees levied on mobile operators and consumers, including national and local taxes on revenues, businesses and business sites as well as regulatory fees such as spectrum and permits fees.

Broadband penetration remains low at less than 10 per cent, with the government setting a target of 30per cent by 2018.  There is more ground to cover as only less than 10per cent of telecom over 160 million subscribers can access broadband.

The Nigeria Broadband market opportunity is huge in terms of distribution and penetration, the group said.

According to statistics from the International Telecoms Union (ITU), despite the fact that Nigeria has 45 million internet users, the highest online population in Africa, only nine per cent or about 14.5 million are actually internet subscribers. Opportunity exists for over 100 million potential internet users.

“Internet-to-Home Penetration is 4.6 per cent while broadband penetration is at a mere six per cent; with a youthful population and growing middle class, the market holds great potential.

“According to the World Bank, in developing economies such as Nigeria, every 10 per cent increase in broadband subscriber penetration accelerates economic growth by 1.38 per cent in the long term. Increasing taxation levels could jeopardise the contribution of the industry towards economic growth and prevent the spread of broadband that would enable Nigeria to become a modern knowledge-based economy,”

ALTON said, warning that the introduction of the CST law without the harmonisation of other extant laws is likely to make the government unpopular, as it will put pressure on the tax system and make it unattractive to investors and be counter-productive for targets on broadband penetration.

Culled from THE NATION NEWSPAPER

http://thenationonlineng.net/telcos-kick-communications-service-tax/

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