‘Taxes on communications services will deepen poverty’
NIGERIA risks deepening the poverty rate if the proposed nine per cent Communication Service Tax is implemented, the global System for Mobile Communications Association, has warned.
The association, in a statement on Thursday, said extensive research on the impact of taxation on mobile communication services indicated that it would pose a severe threat to Nigeria’s future economic growth.
GSMA recalled that the International Telecommunications Union stated that a 10 per cent increase in mobile penetration in a sample of African countries yields a 2.5 per cent increase in GDP per capita.
The 9th National Assembly in September revisited a Communication
Service Tax Bill that had been shelved two years ago.
The proposed bill sponsored by Senator Ndume Ali seeks to impose and collect communication services tax or levy on charges payable by consumers of electronic communication services such as voice calls, SMS, data usage and Pay per View TV stations at the rate of nine per cent.
GSMA, however, said in order to support sustainable economic growth, fiscal policy in Nigeria should promote the wider adoption of broadband services and not hamper it.
“Such taxes could also end up having a disproportionate impact on poorer households,” the association said.
The head of Subsaharan Africa, GSMA, Akinwale goodluck, said the plans of the government to deepen broadband would be affected by a new communications levy.
“The government’s longterm digital ambitions will be severely compromised if these tax proposals go ahead,” goodluck added.
“The potential of mobile broadband is clear from the rapid development of the digital economy in Nigeria. The mobile ecosystem already contributes over $21bn to the Nigerian economy and around 16 per cent of total government tax revenue. The focus should be on boosting mobile penetration, and investment in networks to strengthen the economy, rather than undermining this through potentially punitive taxes.”
GSMA noted that Nigeria currently lagged its regional peers in mobile broadband adoption, saying increasing adoption was crucial in a country where fixed-line penetration was at less than one per cent.
The association said, “Based on GSMA analysis of the total cost of mobile ownership, a 1gb basket in Nigeria cost around seven per cent of average income in 2018.”
“The affordability barrier is particularly evident for lower-income citizens in Nigeria for whom access to a 1gb basket would cost around 24 per cent of income. The new tax, even if only partly reflected in prices, will exacerbate an already significant affordability barrier and hamper the uptake and usage of services, especially for lower-income citizens.”