Telecommunication tax and the FG; A recall?

We have had variety of taxes enforced by the Nigerian government, broad spectrum of taxes that cause leakages and may be somewhat unnecessary. There are too many lines of taxes and citizens are perpetually complaining of multiple taxations which is one of the biggest problems that is affecting the ease of doing business in Nigeria. The claimed basis for creating these taxes is usually for the purpose of generating more revenue.

In some instances, these taxes are directed towards a pool that is subsequently allocated accordingly and in other instances it is directed towards a fund which has a purpose, examples of the latter are the 2.5% education tax directed towards the Tertiary Education Trust Fund from the assessable profit of companies registered in Nigeria, the recent Police Trust fund sourced from a levy of 0.005% of the net profit of companies operating business in Nigeria and most recently was the telecommunication tax to be directed towards the Health Insurance Scheme by virtue of the new National Health Insurance Authority Act 2021 (1).

As regards the telecommunication tax, we heard some weeks back about this being imposed on network service providers (I mean glo, mtn, airtel and co) which in turn will be transferred to the users. Section 26(1c) of the National Health Insurance Bill mandated the collection of “telecommunications tax, not less than one kobo per second of GSM calls” as one of the sources of funding for the health insurance scheme targeted at Vulnerable Group Fund.

This would have led to an increase in call rates and added to the current hardship of Nigeria economy, especially considering the numerous taxes already on ground. Already, telecommunication service providers are being charged with various levies and taxes such as Right of Way Charges, National Information Technology Development Fund Levy, National Cybersecurity Fund, Annual Operating Levy in addition to existing statutory taxes like Companies Income Tax, Tertiary Education Tax, Value Added Tax, excise duty, etc.

Thankfully, this section of the bill has been removed. Contrary to the widespread news that the new NHIA retains a telecommunication tax, the fund will now come from other sources. Sections 25 and 26 of the NHIA establishes the Vulnerable Group Fund (VGF), indicating the various sources from which funding would be drawn. The representative of the NHIA stated that “In relation to the Act, the NHIA wishes to state clearly that the legislation that Mr President assented to DOES NOT make provision for a telecoms tax as a source of funding in the law contrary to hasty reports in some exuberant national media” (2).

It shall be funded by Federal Government allocations, donors, charges from private insurance, fees, fines and commissions, gifts and contributions. It can also be invested in securities and deposits, with interests accrued back to the fund. Proper accounts on the management of this fund will be presented to the Minister of Health not more than 6 months after the succeeding year. The NHIA also continues to be exempt from tax.?

We hope this remains as it is and the Federal Government does not bring it up again or amend the Act to include it, we also hope the FIRS doesn't enforce its collection despite the absence of legislation to back it and we hope the telecommunication service providers do not increase their service rates as a form of hedge or pre-empting future occurrence.

References

1. https://bit.ly/NHIA_pdf
2. https://www.nhis.gov.ng/2022/05/24/national-health-insurance-authority-nhia_-news-release/

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