New National Assembly Bill Could Increase ICT Services Tax By 9% In Nigeria

There are reports that the National Assembly is proposing a 9 percent tax consumers of communication services. This would eventually increase the cost of these services which range from voice to broadband than what it is at the moment. The Alliance for Affordable Internet (A4AI)-Nigeria says this is likely to prevent 50 million Nigerians from paying for basic broadband. In a statement by the coordinator of the group Dr. Ernest Ndukwe :”Balanced fiscal policy must consider affordability of broadband and ICT, and should not put into place additional barriers that would make Internet access unaffordable for hundreds of millions of Nigerians. Nigeria is far behind the more developed countries of the world when it comes to broadband use, and the introduction of the CST will only widen this gap. The National Assembly must reconsider the passage of the CST and its impact on the development of broadband in Nigeria. After such a review, if the introduction of a CST is deemed an absolute necessity, it must consider a lower tax rate than 9%, one that would enable it to achieve fiscal revenue targets without undermining broadband affordability and access.” At the moment users/operators of communication services including pay TV already pay the following to the government in form of taxes;

• 5 percent value added tax (VAT) each time you acquire a device like say a router and recharge your airtime
• 12 percent Custom devices on ICT equipment and since these are not produced in Nigeria, it means nearly all telecom company has had to pay this
• 20 percent on SIM card

Prof Umar Danbatta Executive Vice Chaairman/CEO NCC

While the last one is mainly paid by telecom companies directly, they are required to add the other costs on top of each service you purchase by law. In the case of the bill which is currently before the National Assembly, they would be required to add the 9 percent should it be passed into law. In the past year, Nigerians have had to cope with a 45 percent increase in electricity tariff and another hike in petrol prices.

In a separate TechBooky report published last year, the high cost of buying ICT services is the bane of broadband penetration in Nigeria and by extension Africa. There’s no doubt that with an increase in the number of telecom operators has gradually forced down the cost of buying these services but it’s exactly because of the lack of access to infrastructure and double taxation that the costs have not been reduced to the point where we can increase broadband penetration in Nigeria. Just recently, one of the broadband providers; Spectranet increased across the board their services on all plans. It still costs up to N10,000/$50 to buy 20GB of data and in many cases this might not be enough for a small tech startup. I know a tech startup of eight workers in Abuja that consumes between 60-100GB of data monthly due to the nature of their operations. An 9 percent addition to the overall cost might eventually lead to them having to squeeze themselves to make use of what they have and this means lesser output and the only other option they have is to pass the excess cost to the customer who may not be willing to pay. This decision could have a ripple effect if not carefully done.

Nigeria still has some of the lowest cost according to a report which says 500MB priced at 5.4% of average income in 2014), broadband penetration stands at just 12%. At the heart of the issue here according to A4AI is not just mobile data but broadband which actually is a measure of productivity and ICT penetration level of a society.

With a sharp drop in oil revenues, analysts believe the government would eventually need to generate revenues from other sectors and this could be the beginning of taxes that would be placed on the ICT sector of the Nigerian economy.