World mobile group rejects communication tax plans in Nigeria

The GSM Association (GSMA), a global association of mobile operators, has rejected the 9% taxation proposed in the Communications Service Tax Bill before Federal lawmakers in Nigeria. [quote font="georgia" font_size="22" font_style="italic" align="left" arrow="yes"]The tax will be charged at the rate of nine percent of the fees payable for the service and will be borne by the customers. The extra tax will be applied on voice calls, SMS, MMS, Data and Pay TV viewing, among other services. Service providers will collect this tax from the subscribers and remit to the Federal Inland Revenue Service on a monthly basis.[/quote]The mobile industry pressure groups says that proposed law will adversely impact on the digital development of Nigeria. The Senate and the House of Representatives have commenced the legislative process to enact the Communication Service Tax Bill, which seeks to impose additional charges on users of electronic communication services in Nigeria. The tax will be charged at the rate of nine percent of the fees payable for the service and will be borne by the customers. The extra tax will be applied on voice calls, SMS, MMS, Data and Pay TV viewing, among other services. Service providers will collect this tax from the subscribers and remit to the Federal Inland Revenue Service on a monthly basis. GSMA reacted to the Bill in a report themed: “High consumer taxes on mobile could hold back Nigerian economic and digital development,” stating that the tax will negatively affect the mobile adoption of Nigerians. [caption id="attachment_51255" align="aligncenter" width="8000"] Technology Times file photo shows people seen taking selfies on a smartphone at a phone launch event held in Lagos[/caption] [quote font="georgia" font_size="22" font_style="italic" align="left" arrow="yes"]The GSMA report notes that the Nigerian mobile ecosystem contributed $8.3 billion in value add to the country’s economy in 2014 alone, and mobile operators supported the creation of 164,000 jobs. It also notes that driving mobile growth is a fundamental part of the government’s Vision 2020 plan to consolidate Nigeria’s position as one of the 20 largest economies in the world, and a central element of President Buhari’s election manifesto.[/quote]“If mobile is going to reach its potential for development in Nigeria, supportive policies that increase digital inclusion and drive even greater growth are needed. For these reasons the GSMA, along with other industry organizations including ALTON, ATCON and NATCOMS, has rejected the Nigerian government’s proposed ‘Communication Service Tax’ that would establish a nine per cent tax on users of services such as SMS, voice calls, MMS and data. By pushing up the cost to consumers, this tax will inevitably adversely impact the adoption of mobile,” the report says. According to GSMA, “affordability is already a key challenge in connecting the unconnected. In Nigeria, use of a mobile phone represents on average around five per cent or more of personal income, making basic mobile services unaffordable for vast swathes of society.” The Association maintained that taxing electronic communication services will hit lower income consumers the hardest, making access to mobile even less of a possibility. "It is these consumers and communities that stand to gain the most from the social and economic inclusion that access to mobile provides,” it says. The GSMA report notes that the Nigerian mobile ecosystem contributed $8.3 billion in value add to the country’s economy in 2014 alone, and mobile operators supported the creation of 164,000 jobs. It also notes that driving mobile growth is a fundamental part of the government’s Vision 2020 plan to consolidate Nigeria’s position as one of the 20 largest economies in the world, and a central element of President Buhari’s election manifesto. Nigeria has made remarkable progress in delivering mobile connectivity, but more than half the population of Africa’s biggest economy remains unconnected. Given that only 0.2 per cent of Nigerians have access to fixed telephone lines, mobile represents the first opportunity for the majority of citizens to get access to communications services, GSMA says. [caption id="attachment_38360" align="aligncenter" width="1090"] Mobile phones on display at Ikeja Computer Village in Lagos[/caption] “It’s vital the government looks at the bigger picture. The development of a competitive digital economy is driven by increased mobile penetration and investment in networks. This will ultimately strengthen the economy and lead to faster economic growth, plus higher fiscal income for the government from a broader tax base,” it further says. GSMA further opined that the tax which it says will negatively “impact the take-up of consumer services and therefore industry revenues, the proposed tax will reduce the incentive for mobile operators to invest in the infrastructure improvements that are essential to improve and expand mobile connectivity across Nigeria.” [caption id="attachment_51199" align="aligncenter" width="8000"] People seen taking selfie at a smartphone launch event in Lagos[/caption] [quote font="georgia" font_size="22" font_style="italic" align="left" arrow="yes"]“There are 26 different taxes and fees levied on mobile operators and consumers, including national and local taxes on revenues, businesses and business sites as well as regulatory fees such as spectrum and permits fees. Mobile operators paid $850 million in taxes and regulatory fees in Nigeria in 2014. When set against a backdrop of tumbling revenue per user, all these factors start to erode the incentives for investment in the mobile industry in Nigeria. For investors, the business case may not stack up,” it says.[/quote]According to GSMA, the mobile industry investment in Nigeria is already constrained by multiple levels of taxes and fees, which it says, has started to erode the incentives for investment in the sector. “There are 26 different taxes and fees levied on mobile operators and consumers, including national and local taxes on revenues, businesses and business sites as well as regulatory fees such as spectrum and permits fees. Mobile operators paid $850 million in taxes and regulatory fees in Nigeria in 2014. When set against a backdrop of tumbling revenue per user, all these factors start to erode the incentives for investment in the mobile industry in Nigeria. For investors, the business case may not stack up,” it says. The Association thus urges the government to consider the issue carefully and foster a regulatory environment that encourages the spread of mobile broadband that would enable Nigeria to become a modern knowledge-based economy. “It’s imperative that the government carefully considers all factors in order to create a balanced and equitable taxation structure on mobile. Only by fostering a regulatory environment that encourages mobile penetration and infrastructure investment can the mobile industry fully deliver it’s the economic and social benefits,” GSMA says. The GSM Association is an international body that represents the interests of mobile operators worldwide, uniting nearly 800 operators with more than 250 companies in the broader mobile ecosystem, including handset and device makers, software companies, equipment providers and Internet companies, as well as organizations in adjacent industry sectors.

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