Nigerian govt exempts digital economy from 5% excise duty – Pantami

The Nigerian government on Tuesday announced the exemption of the Nigerian digital economy from the proposed 5 per cent excise duty introduced in August 2022.

The Minister of Communications and Digital Economy, Isa Pantami, said this is in line with the recommendations of the committee constituted to review the applicability of the duty to the telecom sector which is considered already overburdened with taxation and sundry levies.

According to a statement released on Tuesday, Mr Pantami disclosed this at a press briefing organised by the presidential review committee on excise duty in Abuja.

The statement noted that the briefing was organised to provide updates on the status of the 5 per cent excise duty.

In August 2022, the federal government announced that it would begin implementing the proposed excise taxes on telecommunications and beverage services in 2023.

The Minister of Finance, Budget, and National Planning, Zainab Ahmed, announced that the government was preparing to implement a 5 per cent excise tax on telecommunications services, which would raise the total on phone services to 12.5 per cent. The sector has an existing 7.5 per cent on its services.

However, Mr Pantami opposed the new tax, which would increase the cost of telecommunications services in the country.

He said the ministry was not consulted and criticised the timing of the plan.

In September last year, the federal government suspended the proposed new tax on phone calls and other telecommunications services.

Mr Pantami, who is the chairman of the committee, specifically set up the committee to review the proposed excise duty in the telecom sector.

Resolution

On Tuesday, the minister said the committee had carried out its national assignment and submitted its report to the president, justifying why the sector should be exempted.

He explained that the committee’s submissions can be summed up in three arguments put forward to justify why additional burden in form of taxes or any levy 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 excise duty in the telecom sector is the fact that, despite the increase in the cost of all factors of production across the 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,” Mr Pantami said.

He said 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, 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.

“I am happy to report to you that President Muhammadu Buhari, GCFR, has approved the exemption of the digital economy sector from the five (5) per cent excise duty to be paid and this is because of the strength of the argument presented to him by the committee that additional burden on telecom sector will increase the sufferings of Nigerians and that other sectors that are not making as much contribution to the economy should be challenged to do more and pay the 5 per cent excise duty,” he said.

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He, however, assured Nigerians, who are telecom consumers, that the presidential exemption given to the telecom sector shall be sustained by the incoming administration as “the decision by the President is not about any political party or any administration but about Nigeria and welfare of Nigerian citizens,”.

He further noted that the digital economy sector has continued to add value to the Nigerian economy, having contributed 14.07 per cent to the GDP in the first quarter of 2020, 17.79 per cent in the second quarter of 2021 and 18.44 per cent in the second quarter of 2022.

He said the sector has also increased its quarterly revenue generation for the government from N51 billion to over N480 billion, representing a growth of 594 per cent.

He added that the cost of buying data has also reduced from N1,200 in 2019 to N350 presently, despite the increase in the cost of operations, including the energy challenge that has caused mobile network operators to power base stations with over 32,000 power generating to provide seamless services to their teeming consumers.