Senate proposes communication service tax, may reject VAT increase

The Senate is set to reject the proposed 2.2% increase in the Value Added Tax (VAT) being planned by the Federal Government. Minister of Finance, Zainab Ahmad, had since given an indication of the increase from the current 5% to 7.5%.

In the alternative, the lawmakers are seeking a legislative action to impose a tax on Communication Services.

The Bill for an Act to establish the Communication Service Tax was formally introduced on the floor of the Senate on Wednesday by former Senate Leader, Ali Ndume.

Senator Ndume who spoke with newsmen after Senate plenary session described the VAT as skewed against ordinary Nigerians.

He said the Communication Service Tax was a way of distributing wealth in such a way that it would not affect the ordinary people.

He noted that the VAT increase would ultimately create grave discomfort for larger percentage of Nigerians as the prices of good and services were bound to hit the roof.

The proposed Communication Service Tax Bill provides that the rate of the tax is 9% of the charge for the use of the communication service.

The Bill reads in part: “There shall be imposed, charged payable and collected a monthly Communication Service Tax to be levied on charges payable by a user of an Electronic Communication Service other than private Electronic Communication Services.”

The Bill further stated that “the tax shall be levied on Electronic Communication Services supplied by Service Providers.

“For the purpose of this clause, the supply of any form of recharges shall be considered as a charge for usage of Electronic Communication Service.”

The Bill provided that the tax shall be levied on such Electronic Communication Services like Voice Calls; SMS; MMS; Data usage both from Telecommunication Services Providers and Internet Service as well as Pay per View TV Stations.

If the bill is passed, “the tax shall be paid together with the Electronic Communication Service charge payable to the service provider by the consumer of the service.”

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“The tax is due and payable on any supply of Electronic Communication Service within the time period specified under sub-clause (5) of whether or not the person making the supply is permitted or authorised provide Electronic Communication Services.”

The Federal Inland Revenue Services shall be saddled with the responsibility of collecting the tax, with penalties for defaulters

The Bill further states: “The Federal Inland Revenue Service (FIRS) established under section 1 of the Federal Inland Revenue Service (Establishment) Act, 2007 shall be responsible for collection and remittance of tax, any interest and penalty paid under this Bill.”

“The FIRS shall pay the tax collected together with any interest and penalty into the Federation Account,” it added

When passed, service providers shall file a tax return to account for the tax.

“The tax return shall be in a form prescribed by the FIRS and shall state the amount of tax payable for the period and any related matters that may be required.

“The return and the tax due to the accounting period to which the tax return relates shall be submitted and paid to the FIRS not later than the last working day of the month immediately after the month to which the tax return and payment relates.”

The bill also stated that: “The FIRS may extend the period within which the tax return may be submitted and payment made on application in writing by a service provider, where good cause is shown by the applicant.

“The extension shall be communicated to the applicant in writing and shall state the circumstances under which the tax return shall be submitted for the particular period.”

“A service provider who without justification fails to submit to the FIRS the tax return by the date is liable to a pecuniary penalty of N50, 000.00 and a further penalty of Nl0, 000.00 for each day the return is not submitted.

“A service provider who refuses to provide access to its relevant network for Government or its appointed agent as specified in sub-clause (4) (b) and (c) commits an offence and is liable to pay a penalty of five per cent of the annual gross revenue of the last admitted financial statement of the service, provider after the first thirty days and if the situation persists after ninety days, the National Communication Commission may revoke the operating licence of that service provider.”

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