FG may lose trillions as Finance, Digital Economy ministers row over 5% tariff hike on calls, data

The festering rift between the Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed and the Minister of Communications and Digital Economy, Isa Ali Pantami, over the implementation of new tariff hike of five per cent on calls and data may rob Nigeria of the much needed revenue to reflate the economy if urgent steps are not taken to resolve the impasse on time.

If implemented, the excise duty would rise to 12.5 per cent, and telecom operators had hinted that the burden would be pushed to the consumers. This is estimated to generate about N2 trillion to the government annually.

At present, implementation of the tariff hike has been put on hold despite approval by President Muhammadu Buhari until the ongoing stakeholders’ consultations have been concluded and consensus reached.

Confirming the development to Nigerian Tribune, Yunusa Tanko Abdullahi, Special Adviser, Media & Communications to the Minister of Finance, Budget and National Planning, in a telephone conversation on Friday said implementation of the tariff hike had not commenced because all stakeholders were still being consulted currently.

The problem began when the Federal Government announced plans to implement the new tariff hike of five per cent on calls and data, explaining that the initiative would cover five per cent excise duty tax on all voice calls, SMS and data services, in addition to the existing 7.5 per cent Value Added Tax (VAT) paid for goods and services across all sectors of the economy.

At that meeting, Mrs. Ahmed, who was represented by the Assistant Director, Tax Policy, Federal Ministry of Finance, Budget and National Planning, Musa Umar, had noted: “The five per cent excise duty is in the Finance Act 2020, but has never been implemented.

“Henceforth, the five per cent excise duty will be collected by telecom operators and payment made to the Federal Government on a monthly basis, on or before 21st of every month.”

However, shortly after the decision was made public, the Minister of Communications and Digital Economy, Isa Ali Pantami, rejected the move, claiming that he was never consulted during the conceptualisation of the policy.

His disapproval of the policy was publicly expressed at a recent telecoms forum in Lagos organised by the Nigeria Office for Developing the Indigenous Telecoms Sector (NODITS), an agency domiciled in the Nigeria Communications Commission (NCC).

Faulting the timing and process of imposing the tax on the telecom industry, Pantami had stated his resolve to explore every legitimate means to stop the planned five per cent excise duty tax on telecom consumers, insisting that part of the responsibility of a responsive government was not to increase the challenges of its citizens.

Pantami had said: “The Ministry of Communications and Digital Economy is not satisfied with any effort to introduce excise duty on telecommunication services.

“Firstly, I have not been consulted officially and part of the rulemaking is to invite stakeholders to make contributions; I was not consulted officially. Secondly, if we have been contacted, we would have challenged the submission.

“The sectors that are contributing to our economy today are few. What we should be doing is to ensure that all other sectors can also contribute. A lot of sectors are consumers; these are the sectors that we should be tasked to contribute.

“A sector cannot be a consumer today; each sector must contribute a certain percentage to the economy. And if we fail to do that, we would be increasing the pressure and by doing that we would be destroying the digital economy sector.

“Excise duty is introduced to discourage the consumption of certain commodities like alcohol, and tobacco. But today, without broadband penetration, how can you perform financial transactions, how can you deliver lectures without that, how can you work in a hospital; these services are a necessity.”

Miffed by Pantami’s outburst, Mrs. Ahmed said the Communication Minister could not feign ignorance of the planned implementation of five per cent increase on data and calls because the policy went through the Federal Executive Council (FEC), of which he is a member.

Speaking through Abdullahi, her Special Adviser, Media & Communications in a press statement recently, Mrs. Ahmed said: “Against the comments by Prof. Isa Ali Pantami, Minister of Communication and Digital Economy, concerning the five per cent excise duty hike on telecoms services, it is worth noting that there was a circular stating the planned hike which was addressed to the communication minister and other relevant ministries and agencies of government.

“The circular Referenced No. F. 17417/VI/286 dated March 1, 2022, and titled “Approval for Implementation of the 2022 Fiscal Policy Measures and Tariff Amendments” was addressed to different Ministers, including the Minister of Communications and Digital Economy and other heads of government agencies.

“The circular was addressed to the Secretary to the Government of the Federation, Attorney-General of the Federation, Ministers of Industry, Trade and Investment, Agriculture and Rural Development, Mines and Steel and Development.

“Others are Ministers of Health, Aviation, Information and Culture, Budget and National Planning.

“Other heads of agencies copied in the circular are Accountant-General of the Federation, Comptroller-General of Customs, Governor of the Central Bank of Nigeria, Executive Chairman of the Federal Inland Revenue Service and the Director-General of the Raw Materials Research and Development Council.

“Others are the Executive Secretary of Nigerian Export Promotion Council (NEPC) and the Executive Secretary of the Nigerian Investment Promotion Commission.

“Part of the circular reads: “This is to convey that his Excellency Mr. President has approved Supplementary Protection Measures (SPM) for implementation of ECOWAS Common External Tariff (CET) 2022-2026 and excuse duties on non-alcoholic beverage, cigarettes and Tobacco products as well as telecommunication services with effects from 1st April 2022.”

The circular signed by Mrs. Ahmed reads: “A grace of 90 days commencing from the date of implementation of this circular i.e April 1, 2022, shall be granted to all importers who had opened Form M and must have entered into irrevocable trade agreement before the coming into effect of this circular to process and clear these goods at the prevailing duty rates.

“However new import transaction entered from the 1st of April 2022 will be subjected to the new import duty regime.”

Mrs. Ahmed recalled that the Finance Act, 2020 introduced ‘Telecommunication Services’ provided in Nigeria to be liable to excise duty under Section 21 (2) of the Customs and excise tariff etc. (Consolidation) Act, CAP. C49, LFN 2004, and added, “it, therefore, means that all stakeholders have by that singular provision been aware of the Act”.

She averred that considering the need to ensure reasonable transition period before the implementation of the new tax, as well as providing clarity to all stakeholders on implementation modalities, “the excise duty on telecommunication services provided in Nigeria introduced through the Finance Act, 2020 with statutory enactment on 1st January, 2021 has yet to be implemented till date”.

For emphasis, Mrs. Ahmed had vide a circular dated March 1, 2022 informed the Nigeria Customs Service (NCS) and other heads of government ministries, departments and agencies (MDAs), including the Federal Ministry of Communication & Digital Economy about Mr. President’s approval of the implementation of the five per cent excise duty on telecommunication services with effect from 1st June, 2022.

The circular provided a 90-day moratorium with effect from 1st March, 2022 before the implementation of the excise tax, but currently, the excise tax is yet to be implemented.

“An issue as serious as the excise tariff cannot be taken single handedly, as all stakeholders and agencies have been involved including Manufacturers Association of Nigeria (MAN) and Association of Telecom Operators of Nigeria (ALTON), who wrote to the Ministry to be involved in the modalities for implementation of the excise duty”, Mrs. Ahmed further said.

According to her, “suffice it to say that before the Act, the Finance Bill would have been through the FEC of which Prof. Pantami is a member, and the National Assembly. In other words, he was involved in the making of the Finance Act which spells the said excise tariff hike policy. Therefore, he could not obviously have had a point in his dissenting views even as the National Assembly could not have contradicted itself on this matter, because the parliament had passed the Finance Bill before President Muhammadu Buhari signed it into law”, Mrs. Ahmed stated.

Piqued by the subsisting impasse, Mrs. Ahmed reasoned that although Nigeria is celebrated as the largest economy in Africa, translating this wealth into revenues remains a challenge.

Considering this is in line with the provision of the revised National Tax Policy, which provides the framework for a sustainable tax system that would ensure reliable sources of revenue to government and support economic development, she reasoned that the hike is justifiable.

Nigeria is one of the largest telecommunication markets in Africa, and available report from the NCC shows four categories of operators, mobile (GSM), fixed telephony operators (fixed/ fixed wireless), internet service providers (ISPS) and others (operators other than mobile & fixed telephony, ISPs).

The number of subscribers has continued to grow substantially, having increased from about 180 million in 2019 to over 200 million active subscriptions in 2020, representing an increase of over nearly 11 per cent in total subscriptions.

Moreover, many countries in sub-Saharan Africa such as Tanzania, Uganda, Malawi, Kenya, Rwanda, Ghana and Burundi currently impose excise duty on telecommunication services ranging from five per cent to 20 percent.

These factors might have contributed to influencing government decision to increase the tariff on data and calls with the hope of raising enough revenue to fund its numerous developmental projects.

Stakeholders have expressed worry that policy issues like tariff increase could generate such disagreement among cabinet ministers who should be at the forefront of selling the idea to the citizens, and called for quick resolution of the matter to enable the country reap its full benefits of revenue generation.

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