The communication tax – if it is passed in to law, is a gift from the National Assembly that seeks to impose, charge and collect Communication Service Tax (CST) on service fees payable by a user of an electronic communication service at 9 percent.
Essentially, the lawmakers are proposing that mobile service providers charge you the user a tax of 9 percent for every call you make on the network. The bill will mandate the providers to file monthly tax returns with the Federal Inland Revenue Service (FIRS) with strict penalties for non-compliance.
Services that will be charged include voice calls, SMS, MMS, pay per view TV stations, data usage from communication services providers and internet service providers. The bill defines a service provider in relation to the CST Bill as a person permitted or authorised by the Nigerian Communication Commission (NCC) to provide electronic communication services.
While the FIRS will be responsible for the collection of the tax, the agency will pay the tax collected together with any interest and penalty into the Federation Account. The Federal Government will be responsible for the administration and management of the funds. Penalties for non-compliance include N50, 000 for providers that fail to file returns on due date and a further N10, 000 for each day the tax returns is not submitted. Also refusal of service providers to provide government access to the network nodes attracts a penalty of five per cent of the yearly gross revenue of the last audited financial statements. Failure to pay the interest due on default within one month would attract additional interest on the unpaid interest.
The CST bill has made it through the first reading and – if nothing changes – will soon go through the second reading. It is projected that the federal government will earn N20 billion monthly if the CST ever becomes a law.
Importantly, when it does become law, it is a new dawn for the user. The way you communicate or utilize the mobile communication might potentially be affected. To begin with, the tax does not replace the Value Added Tax (VAT) the networks are currently charging users. Do not forget the VAT you paid when you bought the device and the 12 percent custom import duties paid on ICT devices and the 20 percent tax levied on Subscriber Identification Module (SIM) cards.
If you add of that up with the CST, the cost of making a phone call, sending an SMS or MMS, watching DSTV or browsing online becomes a drain on declining income and puts further pressure on household consumption.
Just recently the National Bureau of Statistics (NBS) released the data on household consumption in the second quarter. According to the data, household consumption fell in real terms by -1.05 percent in quarter one 2016 and -6.00 in quarter two 2016 compared to 1.28 percent in quarter one 2016 and 4.48 percent in quarter two 2016.
With the CST in place, the future of household consumption might further diminish as people will be forced to cut their communication needs in order to save for more urgent family needs.
PricewaterhouseCoopers (PwC) made some important observations which deserve mention here.
First, the Bill appears to copy Ghana Communication Service Act. The reference in the Bill to National Health Insurance Levy, which is not applicable in Nigeria, shows that Bill was perhaps developed through a “cut and paste” approach, according to PwC.
Second, although the CST is borne by the users of the electronic communication service, it imposes significant compliance burden and cost on the service providers. In any case, the “burden and cost” will be indirectly transferred on the users.
The PwC also observed that “Multiple taxation already exists 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.”
Moreover, if the Bill becomes a law, it might provide the legal framework for the recent directive from the NCC for service providers to increase the tariff on data.
FRANK ELEANYA
