FG May Reap N21.5bn Monthly From Proposed Tax On Voice Calls | Independent Newspapers Limited
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FG May Reap N21.5bn Monthly From Proposed Tax On Voice Calls

Posted: Mar 7, 2016 at 3:56 pm   /   by   /   comments (0)

Emmanuel Okwuke, Lagos

Telecommunications subscribers in Nigeria must brace up for tougher times in the months ahead if the proposed communications tax bill before the 8th National Assembly is anything to go by. They may soon be paying N21.5 billion on voice calls every month when the bill is passed into law.
The bill, entitled ‘Communication Service Tax Bill (“CST” or the “Bill”) 2015’, seeks to impose, charge and collect communication service tax (CST) on all electronic communication services at 9% which will be borne by subscribers.
Going by subscriber data released monthly by the telecoms industry regulator, Nigerian Communications Commission (NCC) and the current industry’s Average Revenue Per User (ARPU) provided by the operators, Nigerians may well be paying over N21 billion to the coffers of the Federal Government on a monthly basis.
Statistics gotten from the country’s telecoms umpire, NCC’s website, for the month of January 2016 indicates a subscriber base of 151.3 million, with average revenue per user (ARPU) estimated at N1,576 ($8).
The ARPU is a financial performance benchmark in the telecoms industry that measures the average monthly revenue generated by operators from each customer.
The aggregate spend for Nigerian subscribers per month is based on the analysis of the current ARPU benchmark of N1, 576 , the monthly subscriber base of 151.3 million and the tax rate of 9%. Also, the expenditure represents the total subscriber spending on voice telephony service across the three technology platforms in the country, including players in the Global System for Mobile Communications (GSM), the Code Division Multiple Access (CDMA) and fixed telephony platforms.
Consequently, using the industry ARPU benchmark and multiplying it with the number of monthly active subscribers, Independent gathered that overall, Nigerians and other mobile phone users in the country would pay N21.5 billion tax on voice calls monthly whenever the bill is passed.
The rate of the CST, which is proposed at 9 percent for the use of communication services and charged by service providers, is seen by fiscal experts as amongst other taxes being imposed by government to shore up its revenue base as the whirlwinds in the international oil market continue their depreciative impact on accruable earnings by the country from crude oil exports.
According to a ‘Tax Alert’ publication by PricewaterhouseCoopers (PwC), Nigeria, if the bill is enacted into law, it will mandate service providers to file monthly tax returns with the FIRS with strict penalties for non-compliance.
The categories of communication services liable to the tax include voice calls, SMS, MMS, Data and Pay TV. For instance, Section 2 of the bill listed the chargeable services to include: voice calls, SMS, MMS, pay per view TV stations, data usage from telecommunication services providers and internet service providers.
While the Federal Inland Revenue Service (FIRS) will be responsible for the collection of the tax and its payment together with any interest and penalty into the Federation Account, the Federal Government will be responsible for the administration and management of the funds.
The bill provided that all service providers is to file tax returns and pay the tax due not later than the last working day of the month immediately after the month to which the payment relates.
Failure to comply with this provision will attract stiff financial penalties on erring entities.
Commenting on some provisions of the CST Bill, PwC noted that the bill seemed to replicate the Ghana Communication Service Act, adding that 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.
Similarly, the tax and financial services consulting outfit observed that although the CST was borne by the users of the electronic communication service, it imposes significant compliance burden and costs on the service providers.
“Multiple taxations already exist in the information and telecommunications industry such as IT tax on profits, Annual Operator Levy on turnover and VAT on consumption of their services. The introduction of the CST therefore increases the tax burden on both service providers and their customers”, it clarified.