Protocols,
Senate President Sir,
Other distinguished Senators present
Ladies and Gentlemen
We appreciate the Senate President’s speedy response to our request to meet with him.
We congratulate you Sir on all the courageous interventions that the distinguished Senate of the Federal Republic of Nigeria has made to our laws in recent times.
Our mandate is to support the Federal Government to succeed in attracting and protecting investments in the telecommunications industry and to make meaningful input to all aspects of economic development including legislation and management of our industry so it continues to be the oil of growth and development.
The on-going work on the proposed 9% Communication Service Tax Bill (CST) is a trending subject. We would be happy to support Government to make the best of our tax efforts which certainly are key components of strengthening the economy and sustaining our industry. Contrary to uninformed opinions we do not object to reforms in taxation neither do we regard taxes as burden.
No doubt, there is severe pressure at these times and Government revenue cannot be different. We however pray that the template with which the telecom industry is viewed and assessed be slightly modified. The truth, Sir is that there is severe over taxation in our industry. It explains the slow penetration of services into unserved areas of the country. The truth again sir is that contrary to popular belief telecommunication operators and service providers are barely sustaining existence in these times.
There are reasons to suggest that the desire to widen the tax net is laudable and that as things stand telecommunications is about one of the few areas where the net-capture may be widened, we therefore suggest that an increase in VAT tax which is already included in all services of telecommunications by an increase that is not beyond 1% should be a good reform strategy.
Input of recent studies by credible organisations is our guide.
The projections are that a new tax on ICT services as high as 9% that is being proposed would result in excluding 10% of the population, that is talking of about 20 million Nigerians from access. Whereas the survival of our economy is on attracting more citizens into access to internet and therefore ICT services. It does not add up if whatever we do ends up not bringing more people into access.
The reality of Internet access in Nigeria is that it’s all about mobile. Only about 13% of Nigerians get broadband access via mobile while less than 1% does from fixed services.
One of the main reasons the rate of Internet adoption and use is rather slow in Nigeria is the high cost of data subscription.
A 500MB plan costs typically 5.4% of average monthly income. The current definition of affordability used by the UN Broadband Commission is where the price of a broadband plan is less than 5% of average monthly income. If we are to use this definition Nigeria is on the cusp of affordability.
In Nigeria the average income in 2014 was USD$2970 (GNI per capita, source: World Bank), 40% of the population actually earned less than half that amount. In practice this means that a 500MB mobile Internet plan priced at 5.4% of average monthly income actually costs the majority of Nigerians anywhere between 7-18% of monthly income.
In 2013, we planned to achieve 30% broadband penetration by 2018. Current access figure is clearly some way off this target and needs measures to boost growth in usage. A sharp rise in tax as being proposed in the CST will achieve the exact opposite of our desire.
In conclusion, we ask for a reconsideration of the CST Bill.
We recommend, as an alternative, a tax reform that increases the current VAT by a new 1% added for the purpose of development of communications.
Another alternative is that the tax being proposed in the Bill be limited to 0.2%.
Thank you Sir and thank you all for this opportunity and please accept our esteemed regards.
Olusola Teniola
National President, ATCON
