A PAPER ON THE PROPOSED COMMUNICATIONS SERVICES TAX BILL BY OLUSOLA TENIOLA, PRESIDENT OF THE ASSOCIATION OF TELECOMMUNICATIONS COMPANIES OF NIGERIA (ATCON) AT THE LAGOS CHAMBER OF COMMERCE & INDUSTRY’S DIALOUGE SESSION ON THE PROPOSED 9% COMMMUNICATION SERVICES TAX BILL HELD ON AUGUST 17, 2016 AT COMMERCE HOUSE, 1, IDOWU TAYLOR STREET, VICTORIA ISLAND, LAGOS.
- Distinguished President of Lagos Chamber of Commerce and Industry
- Ladies and Gentlemen
I want to sincerely appreciate the organizer of this very important event, “The Lagos Chamber of Commerce & Industry”, for creating a platform to have a dialogue session on the proposed 9% Communications Services Tax. The Association of Telecommunications Companies of Nigeria (ATCON) is happy to identify with this strategic initiative to protect investments made in the telecom industry from undue pressure from the government in the form of yet additional burden on our members that are already overtaxed by all tiers of government (some of them: AOL, VAT, RoW(s), Levy permits, duties etc).
The Growth of Information and Communication Technology during the last few years has been phenomenal and tremendous. It has had a positive impact on every aspect of human life. There is no doubt that the emergence and liberalization of this sector has also impacted positively on revenue accruable to government , employment generation (both Direct and Indirect), Foreign Direct Investment (in tens of billions of dollars) and a host of other positives which time would not permit me to mention.
However, as a way of…..
The Association of Telecommunications Companies of Nigeria (ATCON) is a professional, non-profit, non-political umbrella organization of telecommunications companies of Nigeria. It is also the premier Association that was formed by technocrats in the telecoms industry to facilitate as well as accelerate the growth and development of the Nigerian Telecommunications Industry and this we have been doing for just over two decades in Nigeria.
ATCON was formally inaugurated on December 10, 1993, with a membership profile made up of indigenous and multinational telecommunications companies operating in Nigeria. Membership of the Association has since its inauguration grown to over 100 companies.
The Association holds meetings with government at all levels with the sole aim of influencing government policy in order to create an enabling operating environment for members as well as to protect telecoms/ICT investment in Nigeria.
Background to our Position
Generally, Taxation is one of the many ways through which governments all over the world generate income to be able to discharge their duties to the citizens.
Government at all levels make collections of taxes mandatory through enactment of policies. The contributions of the Communications sector was meagre some fifteen years ago but through the concerted efforts of some patriotic and dedicated experts in the telecommunications sector under the aegis of the Association of Telecommunications Companies of Nigeria who advocated for the liberalization of the sector, the sector is now contributing revenue of well over 8% to the nation’s GDP.
ATCON believes any calculated actions that have potentials to stifle further contribution of the telecoms industry to our GDP must be avoided by all tiers of government in Nigeria as the perceived benefits of imposing a Communication Service tax on telecoms subscribers has the potential to erode if not destroy the achievements that have been made since the telecoms sector was liberated. We therefore advise both the House of Representatives and the Senate (the Legislative arm of government) to discontinue with the bill.
These are a few of our reasons…..
Decrease in the Inflow of FDI to the Sector
The general rule of investment or principle of investment is that institutional Investors will take their investible funds to countries where the tax rate is low or lowest. As we all know that Nigerian telecoms subscribers are already paying tax because VAT is embedded in calls made and data consumed. If the bill sails through it would reduce the subscribers’ consumption of data and reduce length of a voice call, this will result in drop in revenue that would accrue to telecoms operators which will in turn reduce the contribution of the sector to our GDP.
The Return on Investment (ROI) would be badly affected as a result of the above illustrations. Nigeria as a nation needs a lot of investible funds to build infrastructural facilities and provide employment for her teeming population and especially our growing youth. As we know that Nigeria’ telecom industry still needs circa 50,000 base stations to be able to improve on Quality of Service and to reach the unserved and underserved parts of the nation.
ATCON’s position is that whatever we are doing as a nation must not be done to deter investors from staking their hard earned money on the Nigerian telecommunications businesses, in other words, our policies must continue to be investment friendly. It has been established that revenue from voice is still significant and it must be stressed here that the investment that is required to deepen the penetration of Broadband in Nigeria is much greater than the one we used to provide voice telephony. In view of this, the said Communications Service Tax bill should be stepped down so as to encourage investors and make the sector more attractive for foreign direct investors.
ATCON is working with other relevant agencies to increase the Foreign Direct Investment to the sector which is highly capital intensive. This cannot be achieved if the government is considering introducing Communications Services Tax, which will deter further investments to be made.
Loss/Erosion of Innovation and Creativity
ATCON considers the proposed Communications Services Tax bill unnecessary and prohibitive because the operators in the sectors are already faced with multiplicity of taxation. Imposition of Communications Services Tax bill could stifle innovation and creativity in the sector and this would automatically reverse the gains already made in the past decade. This might lead to increase in unemployment, decrease in revenue accruable to government which would heighten the county’s poverty level.
Telecoms Services Unavailability in Some States
Governments at all levels have at one time or the other have expressed the need to gear up the use of ICT to grow and develop their various constituencies. The application of the proposed Communications Services Tax would definitely be a clog in the wheel of roll out of broadband services for the development of the nation-Nigeria. It means that telecommunications services would not be available in some state of the federation.
Speeds-up Chronic Recession
The high taxation takes so much away from both the telecoms operators and subscribers that little or nothing is left to run the business. If government tries to boost the economy with increased government spending, the result is stagflation (simultaneous high inflation and unemployment) instead of prosperity. The only cure for stagflation is to cut both taxes and government spending.
ATCON believes any action that has the potential to derail the telecoms industry should be avoided by all tiers of government in Nigeria as the benefits of imposing a Communication Service Tax on telecoms subscribers are far lower than the revenue that it is going to create for the government. In view of this and other reasons enumerated above, the Association’s position is that the proposed Communications Service Tax bill should be stepped down.
Thank you all for this opportunity and please accept our esteemed regards.