Nigeria: Federal Government to Enforce Excise Duty on Telecoms Services, Contemplates VAT Rate Increase

The Federal Government is gearing up to introduce excise duty on telecommunication services as part of its strategy to augment revenue generation. This revelation emerged in the recently published 2024-2026 Medium-Term Expenditure Framework and Fiscal Strategy Paper.

Recall that in July, President Bola Tinubu signed an executive order suspending the implementation of a five percent excise duty tax on telecoms services.

Nevertheless, the new economic framework for 2024-2026 highlights that one of the measures the government will employ to bolster customs revenue collections is the full enactment of excise duty on telecommunications.

In the document, the government stated that it intends to execute these strategies, even if some of them had been temporarily suspended. It reads, “The following strategies will be implemented to improve Customs revenue collections over the period 2024-2026, despite the fact that some of them have been recently suspended.”

The government further noted, “Full implementation of excise duty on Telecommunication Services in line with the presidential approval published in Official Gazette No. 88 Vol. 109 of 11th May 22 as conveyed via Finance Act, 2023. This is expected to grow excise revenue significantly and enhance budgetary performance.”

Additionally, the government has suggested that it may consider raising the Value Added Tax (VAT) rate from 7.5 percent in the medium term, possibly to the 15 percent rate that the International Monetary Fund (IMF) has recommended.

The Federal Government explained, “The VAT projections over the medium-term are based on holding the rate at 7.5 percent. Raising the VAT rate, however, remains a policy option for the government to consider in the medium term.”

While raising the VAT rate may not be an immediate priority for the government, it stated that it would focus on enhancing VAT coverage and collection efficiency.

The government elaborated, “In the medium term, the government will intensify efforts aimed at improving VAT coverage and collection efficiency. Wider coverage and improved collection efficiency will be achieved through nationwide VAT registration and monitoring, and deployment of ICT (auto-collect) platforms in more sectors of the economy. In addition, the technology solution for deduction and remittance of VAT and Withholding Tax (WHT) from State Government contract payments will be implemented in all 36 states.”

The imposition of excise duty on telecom services has been a contentious issue, with telecom companies asserting that they would transfer the cost to their subscribers.