The proposed 40% tariff hike by telecommunication operators in Nigeria appears imminent, as President Muhammadu Buhari slammed a 5% excise duty on telephone recharge cards and vouchers.
In a letter written by the telecommunications companies under the aegis of the Association of Licensed Telecommunication Operators of Nigeria (ALTON) to the Nigerian Communications Commission (NCC), the telcos had proposed that the price floor of calls will increase from N6.4 to N8.95 while the price cap of SMS will increase from N4 to N5.61, a development that attracted criticism from members of the public.
However, while many people were still debating the 40% proposed tariff, Buhari approved the new 5% charge, saying it is part of the new items on the list of goods liable for excise duty on the Finance Act in the country.
What you should know about the excise duty
Excise duty is a levy charged at the time of manufacturing. It is also a form of indirect tax on the sale or consumption of certain goods, products, services, or activities such as tobacco, alcohol, narcotics, gambling etc., mainly to discourage their use and consumption. Nigeria’s Finance Act has extended the list to include beverages, non-alcoholic drinks, and so on.
In a circular seen, Zainab Ahmed, the Minister of Finance, Budget and National Planning, directed the Nigerian Customs Service (NCS) to create a tariff line for the collection of the excise on mobile telephones, electricity meters (components) and set up boxes at five per cent.
The federal government is expected to raise at least N150 billion from the duty while customs will pocket about 10 billion, a 7% collection fee.
BizWatch Nigeria, however, understands that the new 5% levy on recharge cards will increase call costs and add to other taxes levied on telcos operating in the country. Some of these levies include the right of way charges, National Information Technology Development (NITD) Fund Levy, National Cybersecurity Fund, and Annual Operating Levy in addition to existing statutory taxes like tertiary education tax, companies income tax, and value-added tax.