The Director General of the Budget Office, Ben Akabueze, has disagreed with the Minister of Communications and Digital Economy, Isa Pantanmi, on the suspension of the 5% excise duty on telecommunication services.
Akabueze, while justifying the tax said that tax on telecommunication services in Nigeria is below the African average, noting that members of the private sector were part of the tax policy review committee that deliberated on the matter.
This is coming as the argument over the implementation or otherwise of the tax policy among some analysts and stakeholders rages on.
This was made known by Akabueze while appearing on an Arise Television programme, Global Business report, on Tuesday, September 6, 2022.
Akabueze said that as at 4 years ago, at least 21 African countries had excise taxes on telecom services, adding that Nigeria has the lowest tax to GDP ratio in the continent.
What the Director-General of the Budget Office is saying
On the clash between the Finance Minister of Finance and the Minister of Communications and Digital Economy on the proposed 5% excise duty on telecommunications services, Akabueze said, ‘’Well I am sure that this is a matter that will be resolved in due cause, but let me say something. I am a member of the tax policy review committee which includes members of the private sector, in fact majority of the members are from the private sector and we deliberated on this matter before we arrived at including this in the finance bill for 2020.
‘’One of the things we looked at that time as of 4 years ago at least 21 countries in Africa had excise taxes on telecom services, in all of these countries also the VAT rate was on the average double rate the VAT rate for Nigeria. There are extensive studies on this subject, about the taxation on telecommunication companies in Africa and other developing countries. I assure you that the Average Effective Tax Rate (AETR) on telecommunications in Nigeria is below the African average.
‘’On this continent, as of today we have the lowest tax to GDP ratio and so at a time we face existential revenue challenges I think we all need to be circumspect on what views we take on this matter. This wasn’t something that the ministry of finance woke up and introduced. The finance bill went through the federal executive council, it went to the national assembly as an executive bill from Mr President. There were public hearings and at the end of the day, they passed it into law, it was signed into law.
‘’We were engaging the customs and NCC about implementation and then I remember the Chief Executive of NCC saying that in accordance with their procedures, they will like to have an engagement with their industry practitioners on this to discuss the modalities for the implementation and that was the last I heard before all of these controversies broke, but I’m sure that it’s something that government will resolve in due cause.’’
The Finance Ministry has not been advised on the suspension of the tax
On whether the Finance Ministry and Budget Office are suspending the telecommunications tax for now, where does the money for the expected revenue come from, Akabueze said, ‘’I don’t know about in terms of suspension, this is law now. I haven’t beyond what I read in the media, we haven’t been advised about the suspension. So for instance recently the federal executive council passed the medium-term expenditure framework for 2023 and 2025.
‘’That framework that the federal executive council passed includes projections for this tax. That framework is before the national assembly over the last 2 weeks, the finance committee of the national assembly have been holding engagements with agencies of government on this.
‘’So if we are formally advised that this is not applicable we will have to rework the medium-term expenditure framework. What that means is that the projected revenues will decline and the deficit will increase, which means that we will either have to cut back on expenditure or increase debt.’’
What you should know
- Recall that yesterday (September 5), Pantami had announced the federal government had suspended its planned implementation of the 5% excise duty on telecommunications services during the inaugural meeting of the Presidential Committee on Excise Duty for the Digital Economy Sector.
- The Minister who had earlier rejected the proposed tax noted that the telecommunications sector is already overburdened by excessive and multiple taxations and faulted the timing and process of imposing the tax on the sector.
- The Federal Government through the Budget Office of the Federation had earlier revealed that it would begin the implementation of its proposed excise duties on telecommunication services and beverages in 2023