Global telecom stakeholders led by the GSMA, the industry association for mobile operators worldwide, has expressed concerns over the proposed bill by the National Assembly for the establishment of a tax on electronic communication services in Nigeria.


The GSMA warns that the bill if passed into law could halt Nigeria’s much touted telecom progress. The proposed bill seeks to tax telecommunication services in what would amount to double taxation and unjustifiable targeting of a specific industry potentially scaring off both users and investors.


The global GSM industry association has expressed these worries in conjunction with local stakeholders that include the Association of Licensed Telecommunications Operators of Nigeria (ALTON), the Association of Telecommunications Companies of Nigeria (ATCON) and the National Association of Telecommunications Subscribers (NATCOMS).


In a letter to the Federal Government of Nigeria through the Minister of Finance, Mrs. Kemi Adeosun, and the Minister of Communications, Mr. Adebayo Shittu, the stakeholders warned that the proposed bill to establish a 9% communication service tax to be levied on charges payable by a user of an electronic communication service that covers SMS, voice calls, MMS, data usage supplied by service providers will stunt developments in the sector and erode all past achievements made.



Laws should advance development and not hamper it. The group states noting that government was under obligation to bring the benefits of telecommunications and other technologies to the citizens and not restrict access to such benefits.



The letters were jointly signed by Mortimer Hope, Director Africa, GSMA, Engr. Gbenga Adebayo, Chairman of ALTON, Engr. Lanre Ajayi, President of ATCON and Chief Adeolu Ogunbanjo, National President of NATCOMS.


The signatories were worried that the proposed tax will increase telecom prices for consumers, adversely reduce or slow the adoption of telecom services, scare off foreign and inshore investment as well as undermine Nigeria’s strategic digital goals across sectors.


ALTON Review of “An Act To Provide For The Establishment Of Communications Service Tax & For Matters Connected.”


This bill has gone through 1st reading at both chambers. For the Senate it is not clear when the 2nd reading will be until the sponsor, Senator Ali Ndume (who also is a principal officer of the Senate) authorizes the bill to be listed for 2nd reading.

The applicability of the tax seems to be focused mainly on telecommunications, for services that are already being taxed. The tax is to be levied oncharges payable by users of Electronic Communication Service[any communication through use of wire, radio, optical or electromagnetic transmission emissions or receiving system or part of these and include interconnection], at 9% of the charge for the service. The specific services highlighted are voice calls, SMS, MMS, Data, TV viewing, even though these don’t seem exclusive.


This proposed bill requires a number of clarification. It is necessary to know if this will replace the existing VAT charges If not it means the consumers will be made to pay to government 15% more on present tariff this is not fair to our costumers


A critical question at this point is why the services rendered by a specific industry are the target?


Financial Reporting

We are concerned about how this charge would be applied or captured in the annual reports, because it seems that the tax would clearly be applied to items already being taxed?


When the Government collects this tax on a monthly basis on the revenue       generated, would it become tax deductible during the preparation and filing of annual returns?



The tax is expected to be paid by the consumer to the service provider along with service charge. The direct implication of this being that the service tariff of Operators will have to be increased to include 9% of the charge for the service. This is definitely likely to cause general discontentment with the consumers in an environment where there is already consumer outcry on tariffs.


Filing Returns

There is also an expectation for tax returns to be filed monthly and where (without approval) this is not done, penalties shall be imposed for late payment including interest of 105% on outstanding amount at the prevailing commercial bank lending rate. This provision seems really steep and unwieldy and the penalty ridiculously high.


The timing to file returns is most unreasonable and the penalty for delay is severe, there is a clause where a fine of 5% of gross turnover is imposed on service provider. The existing AOL of 2.5% payable to NCC is too high and due for review


Section 6 (5) proposes that the return and the tax due to the accounting period (i.e. calendar month) to which the tax return relates shall be submitted and paid to the FIRS. We are of the view that this will be impractical and cumbersome.


Tax returns are usually filed on an annual basis, therefore introducing one to be filed monthly while these organizations still have the obligation to file the monthly returns on PAYE Tax, WHT Tax, VAT, NHF, Pension, on an accrual basis is quite burdensome.


Also the Bill seems to imply that the organizations would be expected to engage auditors perpetually to keep verifying their records for completeness? This exercise would definitely be expensive and unwieldy.


The requirement for monthly remittance of the taxes is bound to greatly impact on the organizations’ cash flow:


Access to system/platform (Section 15 [4a & b])

The Minister and FIRS are to be granted powers to make policy to the effect inter- alia, that FIRS, Ministry of Communications, NCC and their appointed agents have unfettered access to operators network especially their billing system/platform. Failure to grant the requisite access will attract a fine of 5% of annual gross revenue of the last admitted financial statement of the service provider and can also lead to NCC revoking an operator’s license.


This in itself poses a security threat to the company’s operations and customer information. In view of the implications of this provision, it will be surprising if NCC actually approves this.


This provision contradicts a similar one following, to the effect that this can only be imposed via a court order after exhausting the administrative process provided therein. Whichever the case may be, this provision is unacceptable and would amount to enforcing a tax by imposing another tax?


Sanctions: Board of Directors and Management can be penalized jointly with the organization for non-compliance etc. thereby criminalizing non-compliance and introducing more stringent penalties than other existing tax legislation.


The Bill seems to be interested in penalty laden instead of focusing on how convenient the imposition, charge and payment of the tax would be for the affected industry.


Our opinion is that the introduction and collection of the Tax without the exclusion of the applicability of the Value Added Tax (“VAT”) (which was introduced by the Value Added Tax Act and is also applicable to services rendered by Service Providers in the telecommunication sector) will amount to double taxation as the proposed Tax is an additional tax on communication services rendered to the same end users who already pay a five percent (5%) tax as VAT.


Also the administration of this tax regime as proposed will be cumbersome and impractical. We must correct this general notion that service providers can absolve any tax without considering the capital and operational cost to the service providers.

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