Nigeria ended the second quarter of 2016 on a rather poor note as the quarterly report from The National Bureau of Statistics (NBS) revealed that we had entered an economic recession after months of pussy footing by the Federal Government. The result? – An increase in the cost of food, transportation and other basic daily essentials; unemployment and underemployment. The nation had no idea that the CST bill was in the oven.
Few weeks before the disclosure by NBS, while speaking at a forum organised by the Lagos Chamber of Commerce and Industry (LCCI), the Minister of Communications, Barrister Adebayo Shittu, openly revealed the government’s plan to introduce the controversial Communication Service Tax Bill (CST). The implication of this bill is that an additional nine per cent charge on users of telecommunication services in Nigeria will be imposed in order to generate N240 billion annually to fund the deficits in the 2016 budget owing to the shortfall in oil revenue.
As the Minister rightly said, “The introduction of new taxes without harmonizing existing ones will put pressure on the Nigerian tax system, making it unattractive to investors. My focus on any tax regime will be to align any process that will stimulate the economy and also ensure that tax system is sufficient by widening the tax net and creating an effective framework for tax compliance to protect the poor and vulnerable in the society.”
Further examination of the Minister’s statement shows how adverse the effect of the bill will be to both individuals and businesses alike, thereby hurting the economy as opposed to healing it. Additional tax burden on individuals who are under the pressure of high living costs while surviving on a meagre income will ultimately deny them the fundamental right to communicate.
Businesses on the other hand will be made to experience low patronage of services and affect profitability of service providers. In effect low return on investment will affect business sustainability and this can lead to job losses and poor Quality of Service since the operators would have little to reinvest in their network. In the long run, imposition of this tax will be counter-productive to government’s economic recovery initiative.
Recent reports from media already show the telecoms industry might be experiencing a nosedive due to operators’ earnings dipping significantly by N31 billion as a result of over 60 million telephone lines that became inactive in the second quarter of 2016.
New tax will only worsen the predicament of telecom operators who already face high operating cost occasioned by numerous factors such as multiple taxes being levied by agencies and all tiers of government, poor infrastructure including inefficient electric power system that has forced them to invest in generating their own power off-grid
The introduction of CST Bill, therefore , calls for a serious rethink if this present administration is serious with its commitment to bring the country back on sustainable economic prosperity. Certainly this new tax cannot be the appropriate instrument to rebuild the nation’s economy. The bill generally will cause hardship to every Nigerian. It will certainly cause more harm than good.
Adigun is a development economist and researcher who lives in Abuja.
