New VAT: Telcos to bear Charges at Customers Exception – ALTON

Contrary to recent media reports of a possible hike in data and call tariffs as the country start implementing the new 7.5% Value Added Tax (VAT) in its dealings, the Association of Licensed Telecommunications Operators of Nigeria (ALTON) has debunked the claim.

Speaking with Business Remarks, the ALTON Chairman, Engr. Gbenga Adebayo said telecommunications companies are to bear charges as subscribers are not affected.

In a public statement jointly signed by the chairman, Gbenga Adebayo and Head of Operations, Gbolahan Awonuga on Friday, the association stated that “further to the assent of the Finance Bill by President Muhammadu Buhari…which reviewed the Value Added Tax (VAT) from 5% to 7.5%, ALTONS wishes to notify consumers that our members will begin applying the new VAT rate on all purchased telecommunication products and services with effect from 1st of February 2020.”

The telecommunications operators assured Nigerians of tariff transparency and quality service delivery.

According to Adebayo, the 2.5% increase in VAT rate will in no way affect telecommunications consumers’ call or data rate.

Adebayo explained to Business Remarks that the idea behind the announcement is to notify the public that they are in compliance with the new VAT Rate.

In his words, “At no point in time did we say the subscribers will bear the burden of the new VAT rate, we have only said our members will begin to implement the rate. So it has no impact on tariffs at all.

“The face value of all airtime and services will remain the same. As it’s been done before, an appropriate deduction which is now 7.5% will be made and remitted to the government. There is no increase in any tariffs at all,” he told Business Remarks.

The ALTON boss emphasized that as a collection agent on behalf of the government, the collection of VAT will no longer be 5% but 7.5% as directed by the Federal Government.

ALSO READ: MTN Plans $1.6bn Investment in Nigeria, Minister canvass for underserved areas

Recall, the changes in the VAT rate generated lots of reactions from stakeholders. This is because the law will significantly change the Nigerian tax regime by amending the Corporate Income Tax (CIT), Personal Income Tax (PIT), Petroleum Profit Tax (PPT), Withholding Tax, Capital Gains Tax (CGT), Value Added Tax (VAT), Customs Duties and Stamp Duties.

In regards to telecommunications and digital activity in Nigeria, an organization with expertise in financial dealings, Ernst & Young said “as with many other jurisdictions across the globe, Nigeria has struggled to formulate a regime that effectively taxes digital activity within the country, given that the current tax laws are mostly dependent on physical presence.

“The Bill, now a law seeks to expand the tax provisions on the determination of a fixed base/permanent establishment for foreign companies with digital operations in Nigeria. Specifically, digital and electronic services shall be subject to CIT in Nigeria, to the extent that such foreign companies have a significant economic presence in Nigeria, and profit can be attributable to such activities”.

Buhari on Monday, January 13 2020 signed the finance bill into law  and would be effective starting from Feb 1, 2020.

He said the bill was “specially designed to support its implementation and to create a truly enabling environment for business and investment by the private sector.”

The president also said signing the bill will reform Nigeria’s tax laws to align with global best practices and support micro, small and medium scale enterprises in line with his administration’s Ease of Doing Business Reforms.

On her part, the Minister of Finance, Zainab Shamsuna Ahmed was proposed to meet 2020 budget targets.

“This is important because the federal government only retains 15% of the VAT — 85% is actually for the states and local governments and the states need additional revenue to be able to meet the obligations of the minimum wage,” She said.

According to Deloitte, “Nigeria has one of the lowest VAT rates in the world. However, it still practices a modified VAT system where taxpayers can only claim a limited portion of input VAT against output VAT charged. Consequently, without a corresponding adjustment to the VAT system, the increment may turn out to have a higher impact than envisaged. This is more so as entities will ultimately seek to pass the cost to end-users. This may result in increased inflation.”