The Minister of Communication and Digital Economy, Isa Ibrahim Pantami has given reasons for the suspension of the proposed 5 percent excise duty on telecoms services in Nigeria.
Pantami announced the suspension during the inaugural meeting of Presidential Committee on Excise Duty for the Digital Economy Sector in Abuja on Monday.
The Minister explained that excise duty is introduced to discourage consumption of certain commodities like alcohol, and tobacco.
While questioned the introduction of excise duty to discourage adoption of digital services, when Nigeria economy is heavily reliant on such services.
“As we know, today, without broadband it is very difficult to carry out financial transactions, deliver virtual lectures, enhance healthcare delivery, adopt e-commerce. Digital services are not luxury but necessity and should be encouraged, rather than discouraged”.
He explained further that collection of excise duty from the digital economy sector would impact the sector and Nigerians negatively.
“The telecoms sector already contributes a lot to the Nigerian economy and it is better for government to consider taxing other sectors of the economy that are not contributing to national development, than increasing taxes on a sector that is already supporting the economy in a great way”.
Pantami stated that the telecommunications industry in Nigeria is already inundated with multiple taxes at the federal and state level and it would be unfair and counter-productive to increase these taxes.
“A few weeks ago, there were 39 such taxes and this number has risen to 41 taxes today. For a duty that will have a great impact on our sector, it is only fair that we should have been adequately consulted prior to the introduction of such taxes”, he said.
The Minister recalled that the telecommunications industry has contributed significantly to revenue generation for the government and supported the economy.
“For example, the ICT sector grew by 14.70% in Q4 2020, making it the fastest growing sector of the Nigerian economy in the last quarter and the only sector to have grown by double digits.
“The ICT sector grew at a rate more than 4 times that of the Agriculture sector, which was the next fastest growing sector of Q4 2020, with a growth rate of 3.42%.
He made it known that this played a critical role in enabling Nigeria to exit recession. “The recent 2nd Quarter Report by the NBS indicated that the ICT sector contributed 18.44% to the total real GDP in Q2 2022.
“This unprecedented contribution of ICT to the GDP is the highest ever contributed by the sector.
“It is noteworthy that this marks the third time that the sector has achieved an unprecedented contribution to Nigeria’s GDP since August 2019- in Q1 2020, Q2 2021 and now Q2 2022”.
He further said the recent auctioning of the 5G spectrum provided $547.2 Million for the government, noted that the Annual Operating Licenses and taxes paid by companies in the sector constitute significant portion of the revenue paid to Federal Inland Revenue Service (FIRS).
“And the sector plays a key role in employing and empowering Nigerians, as well as serving as a catalyst for innovation across all sectors of the economy, Pantami added.
The Minister disclosed that the negative effects the excise duty will have on the fast growing digital economy sector made President Muhammadu Buhari, approved the immediate suspension of excise duty for the telecommunications sector.
“And approved the constitution of this Committee. Mr President gave the approval on the 15th of August 2022. We also earlier rejected the tax and that led to the approval of the committee to look into it and advise Mr. President”.
The Committee which comprises the Minister of Communications and Digital Economy – Chairman, Minister Finance, Budget and National Planning- Member
Others are Chairman of FIRS- Member, Executive Vice Chairman of the Nigerian Communications Commission (NCC) – Member; and two (2) representatives of the Mobile Network Operators – Members.