telecom

SUSPENSION OF EXCISE DUTY ON TELECOM SERVICE

September 14, 2022

It’s not yet Uhuru” is a popular term that has lived with us for decades and we still dwell in it as events unfold.

We get excited when it appears we are getting victorious over any challenge be it domestic or capital. And in the process we forget realities easily and too quickly as well.

William Shakespeare was right in Julius Caesar: “Men at some time are masters of their fates. The fault, dear Brutus, is not in our stars but in ourselves, that we are underlings.”

How do we begin? Telecommunications has dominated every aspect of our lives since 2001 when what has been likened to a revolution in the sector took place.

The Nigerian Communications Commission (NCC) with Ernest Ndukwe as Chief Executive and a well thought out board made up of men and women of strong characters chaired by Alhaji Ahmed Joda (God bless him) and had a free hand to carry on hence the courage to execute the Digital Mobile Licence (DML) auction leading to the advent of GSM services.in 2001.

The board’s appointment was deliberate. President Olusegun Obasanjo (1999-2007) wanted to make a difference by putting in place people who could change the narrative for our telecom sector. Obasanjo gave them the authority to make things work and change the way things were done in the past.

South Africa was a leading light in telecoms and Nigeria which supported that country for its long desired freedom from apartheid was doing well in telecom with a national carrier, Telkom South Africa and two mobile network operators, Vodacom and MTN South Africa, and later a third operator, Cell C.

A worried Obasanjo felt very uncomfortable and gave a marching order and a free hand to operate by the new NCC team with Joda as Chairman and a technocrat, Ndukwe as Executive Vice Chairman (EVC).

They went to work and put in place procedures and processes for the Digital Mobile Licenses and today the rest is history because the real story of what happened prior to the auction, the auction proper and the night after will be told elsewhere.

The telecom sector has always been guided by rules especially since the DML of January 2001. Charles Rivers & Associates, Commonwealth Telecom Organization (CTO), Paul Usoro (SAN) and the government representative, Aare Afe Babalola (SAN), did a good job by putting the rules together and the NCC and bidders played by those rules.

But today, rules are not considered before actions are taken and implementation or enforcement pursued. Where the NCC is expected to exercise its independence, extraneous factors come in to truncate such moves and in the process, one man’s emotional judgment prevails.

In April this year, the Association of Licenced Telecom Operators of Nigeria (ALTON) sent a working paper to the NCC for upward tariff review by as much as 40%. The leaked memo had its media rounds and the NCC reacted saying tariff review has a format which must be followed before conclusions.

Despite the myriad of challenges put forward by the operators for this proposal, the NCC didn’t budge and went on the populist lane to shoot down the ALTON proposal describing it as lacking in merit. ALTON swallowed the bitter pill, shrugged its shoulders and moved on.

But before they could settle down, government announced a five percent excise duty for all telecom subscribers’ activities, be it voice calls, data or text messages.

ALTON felt wounded and raised the alarm saying this is one pill too bitter to swallow alone, that it can no longer bear this burden and insisted its members would push the burden to the subscribers accordingly.

Sensing the danger ahead, the NCC quickly put together a stakeholder conference on the 5% excise duty. The Ministry of Finance, Budget and National Planning, Nigeria Custom Services, Mobile Network Operators (MNOs), and very many stakeholders were there.

But strangely, the Minister of Communications and Digital Economy, Dr.Isa Pantami and the NCC chief executive were not there. They were represented.

Stakeholders stated their positions after which the Finance Ministry said it was going back to the drawing board and see how they could tinker with the collection process which they later moved to January 2023 to begin.

Earlier in the programme, stakeholders made various presentations to justify their positions.

For instance, the NCC Chief represented by Adeleke Adewolu, executive commissioner explained why the stakeholders’ engagement that day.

Even though the NCC didn’t see anything wrong with the excise duty because it is a government policy as enshrined in the Finance Act of 2020, Adewolu, simply said at the stakeholders’ meeting that the new policy came out of the Finance Act of 2020 and citing section 37 of the Finance Act, said the government amended section 21 of the Customs & Excise Tariff by inserting subsection 2, which provides as follows: “Telecommunications services provided in Nigeria shall be charged with duties of excise at the rates specified under the duty column in the Schedule as the President may by Order prescribe pursuant to Section 13 of the Act”.

The Finance Minister was even more direct about the new law.

This additional cost on the subscribers, Minister, Mrs. Zainab Ahmed explained is part of the government’s moves to diversify its source of revenue to the non-oil sector. “Payment is to be made on monthly basis, on or before the 21st of every month. The duty rate was not captured in the Act because it is the responsibility of the President to fix the rate on excise duties and he has fixed five percent for telecommunication services which include GSM. It is public knowledge that our revenue cannot run our financial obligations, so we are to shift our attention to non-oil revenue. The responsibility of generating revenue to run government lies with us all.” The Minister spoke through the Assistant Chief officer in the Ministry, Mr. Frank Oshanipin .at the stakeholders meeting.

But the Association of Licensed Telecom Operators of Nigeria (ALTON) frowned at this saying it’s members may not be able to subsidize the subscribers further in the light of the cost of providing services which they put at 35% for operation alone. ALTON Chairman, Mr.Gbenga Adebayo told the stakeholders that its members including MTN, Globacom, Airtel, and 9mobile, among others, are already in dire straits given the cost of operation. Then this 5% excise duty which they may not be able to absorb as the economy stands.

ALTON was not sure of take-off date yet, but stakeholders were optimistic that talks to prevail on the government for a rethink, were on with the Finance Minister to advise the government on the implications.

Even though he was absent at the stakeholders meeting in Abuja,

Communications & Digital Economy Minister, Dr.Isa Pantami frowned at the new 5% excise duty saying neither him nor his Ministry was consulted before government came up with that position. He spoke in Lagos at a local content conference long after the event.

He specifically said he was going to resist it since he has the President’s mandate to challenge any policy that could spell negative outcome for the government.

This is where our story begins.

The Minister’s position appears to be mere grandstanding as he believes he was not given a position to exercise his powers as a super minister.

So he boasted he was going to go behind the scenes to alter the proposal and that he has done and went ahead to set up a committee to review the same position canvassed by Zainab Ahmed so he could claim credit for the eventual implementation as if the Ministers are now in competition to outdo each other for relevance.

If the 5% is truly abolished for its odious implementation and implications, why another committee by Pantami if not for showmanship?

Director General, Budget Office, Ben Akabueze, does not agree with Pantami’s position. When he spoke on Arise News last week, he was clear about government’s position.

“I don’t know about the suspension. This is the law now. So, beyond what I have read in the media, we haven’t been advised in terms of the suspension. For instance, recently the Federal Executive Council (FEC) passed the MTEF for 2023-2025.

“If we are formally advised that this is no longer applicable, then we will have to rework that Medium Term Expenditure Framework.” Akabueze explained.

Pantami and the agencies he supervises have been in a cat and mouse game. He runs these agencies like a tsar and the bulk stops on his desk.

The NCC is empowered by the Nigerian Communications Act 2003 which went through rigorous processes managed by then House Committee, Chairman, Hon.Nduka Irabor, EVC of NCC then, Ndukwe, foremost telecom lawyer, Usoro and Pyramid Research.

But Pantami doesn’t want to know what the Act says and everything must be at his beck and call. He makes the rules and they must be obeyed. Here is the dilemma in the sector today where reason and caution are thrown to the wind and replaced with emotions.

If the government thinks that the law has been enacted to boost revenue as Akabueze pointed out, common sense should suggest more interactions by the stakeholders to find a common ground in the interests of consumers of telecom services instead of running in a circle as Pantami has started.

Whose interest is he protecting? If he is in government and pretends to be populist, then we wait and observe but we will not “siddon look “.

Early last week the federal government announced the suspension of the proposed 5 per cent Excise Duty on telecommunications services, and inaugurated a committee chaired by Minister Pantami, to review the policy, immediately.

During the inauguration of this Committee, which he chairs allegedly on the directive of President Muhammadu Buhari, Pantami claimed including his Finance, Budget and National Planning, colleague, Zainab Ahmed as member, he said the decision on the suspended policy will be made known after the committee completes its report.

He did not tell us what to expect or even the terms of reference in that regard. He simply said Mr. President acted on a petition written by him (Pantami) as the Chairman of the Presidential Council on Digital Economy and eGovernment, as the policy has the potential to impact negatively on the digital economy sector, and particularly, telecommunications.

While admitting that telecom sector was already overburdened with a plethora of taxes totalling about 41 categories, the Minister said some of these are multiple taxations because other tiers or levels of government were imposing same levies that MNOs had already paid to the federal government.

“Excessive taxation has been a central challenge of the Information and Communications Technology sector” he said, insisting that “it is unfair to overburden such a sector that is so central to the nation’s growth and development and especially because the sector rarely receives subsidy which other sectors have enjoyed and despite the spiralling inflation, and cost of production, particularly the energy factor, the network service providers have not increased prices of services.”

NCC CEO, Danbatta; his Federal Inland Revenue Service (FIRS) counterpart, Mr. Muhammad Nami; and representatives of Mobile Network Operators (MNOs) are members of the committee. But in reality, it is too early in the day for Nigerians to celebrate that a cheery news is underway, more so when there are no visible terms of reference for the committee as Pantami is a judge in his own cause.

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