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Three Reasons Why Telecoms Sector is Exempted from 5% Excise Duty Payment

Three Reasons Telecoms Sector is Exempted from 5% Excise Duty Payment

After suspending the proposed 5% excise duty on telecom services, the Federal Government has finally removed the proposed 5% excise duty on the telecom sector of Nigeria’s Digital Economy.

The announcement which was made by the Minister of Communications and Digital Economy, Prof. Isa Ali Ibrahim Pantami follows recommendations of the Presidential Review Committee on Excise Duty in the Digital Economy Sector.

The decision was taken due to the sector being already overburdened with taxation and levies. President Muhammadu Buhari had suspended the payment of the duty in August 2022.

The new 5% per cent Excise Duty is part of the new Finance Act signed into law by the President in 2020.

It is meant to be collected by the Nigerian Customs Service, and President Buhari had given directive that it be enforced on all telecoms service providers in the country on all local and foreign goods and services.

The Minister of Finance, Budget and Planning, Mrs Zainab Ahmed, had urged stakeholders to support the implementation, saying the decision was informed by the dwindling revenue of the federal government from oil and gas.

She said other countries in Africa, including Malawi, Uganda and Tanzania, among others, have all keyed into the revenue generation pattern.

Click To Read: No to the Proposed 5% Excise Duty on Telecommunications Services

The payment of the 5% excise duty was objected by the Minister in August 2022, following which President Muhammadu Buhari suspended its application to the telecom sector and set up a Presidential Review Committee on Excise Duty in the Digital Economy Sector.

The committee had carried out its national assignment and accordingly submitted its report to the President, justifying why the sector should be exempted.

The Minister said the committee’s submissions could be summed up in three arguments put forward to justify why additional burden in form of taxes or any level should not be imposed on the telecom sector to prevent a reversal of the important contribution the sector is making to the growth of the Nigerian economy.

“Our justifications are based on three premises: First, is the fact that operators in the telecoms sub-sector of the digital economy industry currently pay no fewer than 41 different categories of taxes, levies and charges; secondly, that telecoms have continued to be a major contributor to the Nigerian economy in terms of Gross Domestic Product Contribution (GDP).

“The third ground for contesting the 5% Excise Duty in the telecom sector is the fact that, despite increase in the cost of all factors of production across sector, and naturally leading to increase in costs of products and services, the telecom sector is the only sector where the cost of service has been stable and in many cases continued to go down over the past years and therefore, adding more burden will destroy the sector,” the Minister said.

The Minister also informed the gathering that the President, having looked into the arguments put forward by the Committee and relying on the provision of Section 5 of the Nigerian 1999 Constitution, as amended, has therefore, exempted the telecom sector from the list of sectors to pay the excise duty as stated in Finance Act of 2021 and other subsidiary legislations, all of which are not as superior as the Constitution which permits the President to grant such waiver.

About Bukola Olanrewaju

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