Nigeria: NCC Calls for Full Exemption of Telecom Companies from Excise Duty Amidst Concerns of Multiple Taxation

The Nigerian Communications Commission (NCC) is urging for a complete exemption of the telecom industry from paying excise duty, citing the non-luxury nature of its services. Prof. Umar Danbatta, the Executive Vice Chairman of the NCC, emphasized this during the Telecom Executives and Regulators Forum (TERF) organized by the Association of Telecommunications Companies of Nigeria (ATCON).

Danbatta commended the recent suspension of the 5% excise duty on telecommunication services but stressed the industry’s need for total exemption. He disclosed ongoing discussions with the Minister of Communications, Innovation, and Digital Economy, Bosun Tijani, to address the industry’s tax concerns and ensure the exclusion of telecom services from excise duties.

Key points discussed at the TERF:

1. The telecom industry initially faced 41 different levies, taxes, and charges before the government proposed a 5% excise duty on telecommunication services. This number has now risen to 46.
2. The exemption from excise duty was initially approved by former President Muhammadu Buhari but reappeared in the Finance Act amended by the National Assembly.
3. Danbatta commended President Tinubu’s decision to suspend the payment of excise duty. However, he underscored the necessity of not merely suspending but completely exempting the industry from excise duty, as such duties typically apply to luxury items, which telecom services are not.
4. Telecommunication services have become essential for over 220 million Nigerians and cannot be classified as a luxury.
5. Implementing the planned 5% excise duty would have placed the burden on millions of subscribers, potentially rendering these essential services unaffordable for many.

The NCC is pleased with the suspension but is actively engaging with the minister to advocate for a complete exemption of the sector from this duty.

Mr. Tony Emoekpere, the President of ATCON, emphasized that multiple taxation is a significant obstacle the industry is grappling with. Resolving these challenges would attract increased investments in the sector, ultimately driving its expansion.

Impact of Multiple Taxation on the Nigerian Telecom Industry:

1. Increased Costs: Multiple taxation leads to higher operating costs for telecom companies, reducing profitability and financial resources for network expansion and improvement.
2. Reduced Investment: High taxation discourages investment in the sector, hindering network expansion and technological advancement.
3. Reduced Innovation: Excessive taxation limits funds available for research and development, slowing the introduction of new services and technologies.
4. Increased Consumer Costs: Telecom companies may pass on tax burdens to consumers through higher tariffs, making services less affordable.
5. Negative Impact on Broadband Access: Multiple taxes can hinder broadband infrastructure rollout, limiting internet access and hindering economic development.
6. Discouragement of Foreign Investment: Excessive taxation can deter foreign investors from entering the market, limiting competition and innovation.
7. Compliance Challenges: Multiple taxes create complexity and administrative burdens for operators, leading to compliance challenges and disputes.
8. Economic Impact: The telecoms industry plays a crucial role in economic development, job creation, and revenue generation, all of which can be hampered by excessive taxation.
9. Uncertainty: Frequent changes in tax policies and multiple tax authorities create uncertainty for telecom companies, affecting long-term planning and investment decisions.

To address these issues, regulatory bodies like the Nigerian Communications Commission (NCC) advocate for a fair and reasonable tax regime that balances government revenue needs with industry growth and sustainability.