The proposed 9% Communication Tax By the Nigerian National Assembly: Its Benefits and Pitfalls





Communication which is the act of exchanging information by speaking, writing or using any other medium is undoubtedly the vehicle that drives relationships in the society. Technology has modified man’s means of communication in various positive ways and thus, we can now communicate over long distances via telephone calls, texts, social media handouts, e-mail, telex and so on. However, these means of communication are controlled and facilitated by network providers who make available network services for this purpose. As consumers of this service, for every call, text, or e-mail sent, one is charged in form of airtime or data at rates fixed by these network providers.
What is communication tax?
Communication tax simply means a percentage of money in form of charges levied on and payable by consumers of electronic services to the government through their network providers. This means for every call or text sent, the consumer is to pay a certain amount (percentage) of money in addition to the fixed charge for using the electronic communication service.
Pursuant to item 46 of the Exclusive legislative list of the 1999 CFRN, the National Assembly has the power to make laws on telecommunication in Nigeria, thus as held by the Court of Appeal in HIS Nigeria Limited v Attorney General of the Federation and 4ors (2018), issues relating to telecommunications falls exclusively within the purview of the National Assembly.
The communication tax system has been operative in some countries like Ghana ( since 2008) at a rate of 6% but effective from October 1, 2019, was reviewed to 9% . However the first attempt to introduce this system in Nigeria was championed by the former minister of communication, Adebayo Shittu in 2016, but was  discarded by the National Assembly consequent upon the outcry of stakeholders.
Nevertheless, Nigerians are again faced with the possibility of this system under the current Senate as Senator Ali Ndume (APC Borno South) proposed the bill that will make consumers pay a 9% tax on use of of electronic communication services including; voice calls, data consumption, SMS, MMS, and payTV . For instance, if your service provider (which according to section 17(d)(ii) of the bill  is a person permitted or authorized under the NCC to provide electronic communication services) charges at a rate of 5k per second on calls and you make a call for ten minutes, the service accrues to 30 naira, the bill proposes that a 9% tax of #2.70 would be paid along with the service charge, making a total of #32.7 approximately 33 naira, the cost varies with the length of time used and the number of times the service is used. This means if you make ten calls in a day, you get taxed on each one. This tax accrues and is paid monthly by the service provider to the government through the FIRS ( section 1(2) communication tax bill). The same applies for other electronic services covered by the bill. According to section 17(d)(i) electronic services include a service providing  electronic communication, a closed user group service, a private electronic communication service, a radio communication service and value added services.
The bill passed the first reading of the House of Senate on Wednesday, October 2, 2019. According to Punch reports; the bill is tailored to replace the 2.2% increase in value added tax (VAT) proposed by the Federal government, as the proposition does not appeal to the Senate. Major highlights of the bill are as follows ;
• Electronic communication services subject to the levy include: voice calls, SMS, MMS, data usage (both from Telecommunication Services Providers and Internet Service Providers), Pay per View TV Stations etc.- section 2(4) Communication tax bill
• The tax is to be paid together with the electronic communication service charge payable to the service provider by the user of the service.
• The tax is payable whether or not the person making the supply is permitted or authorized to provide electronic communications services.
• The Federal Inland Revenue Service (FIRS) is responsible for collecting the tax from service providers and remitting it into the Federation Account.- section 5(1) communication tax bill
• All service providers are expected to file monthly returns not later than the last working day of the month immediately after the month to which the tax returns and payment relate.
• Penalty for failure to file returns on or before the due date is N50,000 and an additional N10,000 for each day the returns are not submitted.
• Failure to pay the tax by the due date attracts monthly interest on the tax due at a rate of 150% of the average of prevailing commercial banks’ lending rates as published by the Central Bank of Nigeria and for this purpose, part of one month shall be deemed to be one month. Where interest payable is not paid within one month after the due date, interest shall be paid on the unpaid interest at the same rate and manner on the unpaid tax. Where tax, penalty and/ or interest is due, FIRS may apply to the Court for an order that compels an individual or business who holds money for or on account of the service provider to pay to the FIRS that money or so much of it as is sufficient to discharge amount due. Where this situation continues, FIRS may apply to the Court for an order to distrain the assets, goods, etc. of the service provider.
• In the case of liquidation or bankruptcy, the tax, due shall take precedence over other obligations.
• For the purpose of verification of taxes due to government, an agent would be appointed to establish both electronic and physical monitoring mechanisms to monitor, analyze, verify and save all necessary data and information.
• A service provider who refuses to provide access to its relevant network for government or its appointed agent commits an offence and is liable to a penalty of 5% of annual gross revenue of the last audited financial statements and if situation persists after 90 days, National Communications Commission (NCC) may revoke the operating license of that service provider.
As stated earlier, the bill has scaled through the first reading of the Senate. This development has been followed with various views and outcry of the public. Thus, subsequently, the benefit and pitfalls of this bill shall be examined.
On it’s bright side, one of the major aims of this proposition is revenue generation. Consequent upon the dwindling economy and international debt ratio of the nation and the sad fact that a huge fraction of our resources go into debt servicing, the government revenue generating bodies seem to be under pressure to save the situation, resulting in the implementation of various structures and policies to generate income, one of which is taxing the citizens. With a record of $28.5 billion budget presented to the National assembly by the president for 2020 and considering the government needs, more taxes seem the obvious solution. A lot of strength has been drawn from it’s applicability and effectiveness in some countries like Ghana where this policy has been in operation since 2008 . In an interview, Babatunde Fowler, former  Chairman of the Federal Inland Revenue Service (FIRS) said

 “ …we compare ourselves to developing countries but Ghana introduced tax and used it to fund their universities and that is why Nigerians are now going to University of Ghana. They didn’t look for aid, they did it themselves…”



More so, in the opinion of Mr Babatunde Fowler, the implementation of this tax policy will reduce the rate at which Nigerians talk on the phone . In his words “… Nigerians talk a lot on the phone; they even talk more than is required so for them to have capacity or revenue to talk so much, I don’t see any harm in paying a little bit more to the government.” However, he seems to be restricting the effect of this tax policy to phone calls, on the contrary it will reduce the time people spend online generally. Many Nigerians spend their days online  or using other electronic services for various reasons ( positive and negative), however, this policy will serve as a check on our use of electronics service making room for direction of one’s time to other productive activities.
Again, just as in the case of any tax policy, it is a means of redistributing income. This is evident in the fact that the more frequent users of this service will accrue more cost. This also forms part of the reasons for the proposition as stated by it’s sponsor, Senator Ndume after the Senate took the first reading of the bill.
While the brunt is on the consumer, penalty is also attached for service providers who fail to submit returns to the FIRS, this makes for accountability and efficiency.
According to section 15(4)(a) of the bill, the minister and the FIRS in collaboration with the ministry of communication and the Nigerian Communication Commission, shall appoint an agent who will establish both electronic and physical monitoring mechanisms to monitor, analyze, verify and save all necessary data and information for the purpose of accurate computation of taxes due to the government.
The proposed communication tax bill is also fraught with a lot of pitfalls, to be examined below.
First, the implementation of this proposed bill will definitely lead to increased internet cost in Nigeria . Sadly, Nigerians already pay relatively high costs for data and electronic communication services and this policy further increase the cost and consumers will be made to bear the brunt. This is coming at a time when many Nigerians are suffering from the economic strain the country is currently experiencing. Recourse might be taken to the fact that this system  worked in Ghana and is still operating but there is the question of the different economic state of both countries then and now, and the percentage until recently was at 6% charge since 2008 in Ghana.
Secondly, the impact will be felt on communication generally as an increase in the cost of electronic communication services will by implication will lead to a decrease in demand for data as well as other electronic services or at least a hinge on it. In fact, many consumers who already complain about bad network services see it as extra charge without getting value for their money.
Thirdly, the telecommunication and communication sector is recorded to be a very important sector of the economy and a pillar to many other sectors in the country, this is because virtually all sectors make use of it in carrying out their operations. Aside this many businesses are carried out online. Consequently, increase in service cost will lead to complementary increase in cost of operation for other sectors and businesses.
Furthermore, according to some tax experts at Deloitte a consulting firm, the operation of the proposed tax policy in Nigeria poses the question,  considering that telecommunication services still need to be extended especially to the rural areas, will this bill not be perceived to be a deliberate attempt to stall this particular sector? . This is not farfetched as the increased cost would likely reduce demand, which could discourage intending investors.
Again, contrary to the expected result of distribution of income, payment of tax on electronic communication might bear down heavily on the less financially buoyant and those who have financial inability to borrow. Wealthier people are likely to spend more on using the service.
Another detriment is the effect of cost of collection of taxes. It is a truism that collection of taxes cost a lot, thus while income is being generated, a complementary sum is also spent on collection and in some unfortunate situations a balance deficit might result.
Addition of more tax schemes, will result in additional income spent in a economy. In the present proposed tax bill, the tax is paid together with the service charge payable to the service providers and to be  collected by the FIRS for remission to the Federation account. Undoubtedly, the procedures for separating the tax from the service charge and collection by the FIRS will cost both time and money on the part of the service providers and the Federal Government.
Aside these, the bill contains some inconsiderate policies against service providers; for instance, failure to pay the tax by the due date attracts monthly interest on tax due at a rate of 150% of the average of prevailing commercial banks, this gives no room for unforeseen circumstances.
Furthermore, it contains that in the case of liquidation or bankruptcy, the tax takes precedence over other obligations. While it makes for accountability and efficiency of some sort, it also appears draconian.
Some writers have reacted to the development in several articles on the subject. In his article “ proposed communication tax is ill-advisable”  Tonie Iredia opined that though the policy is a move to generate revenue, the nation should spend more time closing all leakages in her financial framework and reduce the unending high cost of governance. He further opines that

 “…many Nigerians are still shocked that an unduly inflated bureaucracy is still with us. While we expected an executive bill seeking to reduce the number of ministers and the stupendous remuneration in the National assembly, a move which shows leadership by example”.



In his opinion communication tax or any other tax will get feeble support if some people are allowed to remain in luxury.
While there is truth in this assertion, it is also considerably wise for the government in lieu of the people’s plight and the range of electronic communication services covered by the bill to reduced the tax rate and subsequently as the economy gets better it can proposed rate can be implemented.
In conclusion, the proposed tax policy is not exempted from the old saying that everything that has an advantage surely has a disadvantage. Although opinion is rife on it’s demerits at the moment, the government must weigh its pros and cons and ensure that a policy that will do more good than harm to the nation’s economy is adopted.
Kalu Rejoice Chioma is a law student of the University of Nigeria. She has interests in corporate law, human rights, intellectual property law, public speaking, research and advocacy, and a strong desire to rise to the best of her abilities in the legal world and beyond.
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