Proposed Suspension Of Telecom Excise Duty Implementation

Introduction: The Finance Act, 2020, introduced a 5% excise duty on telecommunication services in Nigeria, scheduled for implementation in 2023. Recently, the Minister of Communications and Digital Economy, Isa Pantami, declared a purported suspension of this excise duty during the inaugural meeting of the Presidential Committee on Excise Duty for the Digital Economy Sector. Pantami justified the suspension, citing concerns that the additional tax would strain the already heavily taxed telecom industry, highlighting the existence of 41 categories of state and federal taxes in the sector. Purported Suspension and Differing Views: While the Communications Minister, relying on his executive responsibilities under Section 148 of the Constitution, vowed to repeal the telco tax to protect the digital economy sector, the Director General of the Budget Office, Ben Akabueze, contradicted this announcement. Akabueze stated that the Finance Ministry had not been officially advised on the suspension, emphasizing the crucial role of the Telecom tax in addressing Nigeria’s revenue challenges. He pointed out that Nigeria has the lowest tax-to-GDP ratio in Africa, and the Average Effective Tax Rate on Telecom in Nigeria is below the African average. The DG Budget Office highlighted those projections in the medium-term expenditure framework for 2023-2025, recently approved by the federal executive council, include the Telecom tax. Cancelling the implementation would require reworking the framework, impacting projected revenues and potentially increasing the deficit, necessitating expenditure cuts or increased debt. Presidential Directive and Conclusion: The Communications Minister announced that President Muhammadu Buhari directed the constitution of a committee to thoroughly examine the Telecom excise matter and provide recommendations. In the absence of an official confirmation on the suspension, the situation remains uncertain. Stakeholders across sectors await the committee’s findings, anticipating an outcome that considers the interests of both private and public entities. For professional advice on Accountancy, Transfer Pricing, Tax, Assurance, Outsourcing, online accounting support, Company Registration, and CAC matters, please contact Sunmola David & CO (Chartered Accountants & Tax Practitioners) at Lagos, Ogun state Nigeria offices, www.sunmoladavid.com. You can also reach us via WhatsApp at +2348038460036.