Call tax? Not at all, say stakeholders

Central Bank Governor Godwin Emefiele has advised the Federal Government to explore the imposition of a new tax on calls made above three minutes, among other measures, to shore up revenue as the recession takes its toll on our fragile economy. Stakeholders in the telecoms industry have kicked against the

suggestion. They say such a tax will further stunt the growth of the sector, which they claim is the gold mine of the Federal Government.

Though the forum was not designed to discuss tax issues or how to raise money to finance Federal Government’s budget deficit, the economic recession ravaging the nation made the idea of discussing how to pull the economy out of the woods almost inevitable at every forum organised by professional bodies.

So, when the Governor of the Central Bank of Nigeria (CBN), Godwin Emefiele, found himself amongst his professional colleagues during this year’s Annual Bankers’ Dinner organised by the Chartered Institute of Bankers of Nigeria (CIBN) in Lagos, he used the occasion to proffer solutions to the cash crunch problem bedeviling the nation.

When he mounted the podium and was handed the microphone to deliver his keynote address, all the bank CEOs listened attentively.

He said: “There are several ways we can raise additional revenue to finance the increased expenditure that is needed to engender fast and sustainable growth in the economy.

“I think we can consider introducing a negligible telecom surcharge to be entirely borne by the initiator of a call. In order to protect the poor and vulnerable amongst us, we could structure it to only take effect after the third minute of talk.

“Some analyses have indicated that the government could earn about N100 billion per annum from this alone. Obviously, this surcharge will mainly be borne by middle and upper class people since I do not know many poor people who make calls for more than three minutes!”

On other plausible new sources of raising funds, Emefiele said: “Nigeria could consider introducing minimal property taxes across the country. This not only raises money for the government but also could be a veritable weapon against corruption since it creates a database of who really owns homes in this country.

“Another option to consider would be to fully implement the 2003 Cabotage Act. This Act stipulates that all cargoes and passengers in the inland and coastal waters be transported by ships and ferries built, owned, crewed and manned by Nigerians.

“Contrary to the requirement of this Act, there are several foreign-owned vessels providing shipping services locally. Out of about 600 ships that operate within our waters, only about 60 of them are owned by Nigerians and are mostly idle, in violation of the Act.

“Industry sources suggest Nigeria may be losing as much as N2 trillion annually from this anomaly. In addition to raising revenue, a full implementation of the Act could also spur job creation, capacity building, and significant backward integration.”

According to the Nigerian Communications Commission (NCC), mobile telephone subscription increased from 149million in Q2 of this year to 153million as at September and teledensity moved to 109 per cent.

Telephone density or teledensity is the number of telephone connections for every hundred individuals living within an area. It varies widely across the nations and also between urban and rural areas within a country.

There are currently five Mobile Network Operators (MNOs) in the country. They are Airtel Nigeria Limited, Etisalat Nigeria, Globacom Nigeria Limited, MTN Nigeria Communications Limited and NATCOM Consortium trading as ntel.

Fixed/Fixed Wireless Operators include IPNX, 21st Century Nigeria Limited, Glo Wired and MTN Wired in that order that have contributed to the growth of the sector meaningfully while Smile Communications provides Voice over Internet Protocol (VoIP) services among others.

Reacting to the CBN’s suggestiion, the Chairman, Association of Licensed Telecoms Operators of Nigeria (ALTON), Engr. Gbenga Adebayo, said the group disagreed with the CBN’s proposal. He warned that it will put spanners in the wheel of government’s ambition of growing the industry.

In an email response, he said:  “We disagree with the proposal to introduce telecom call tax: this will impact on accessibility and affordability of telecom services. It will also contradict government’s broadband penetration objectives of achieving 30 per cent by 2018.

“Telecom is the most affordable service today and introduction of any further taxes and levies will impact on the users in the face of current economic recessions.

“Government should rather look widening the tax net and capture more people who are currently not paying any taxes other than further taxes on telecom services.

“Unconfirmed  report has it that there are less than 20 million Nigerians who currently pay any taxes to government, meaning there could be well over 50 million people who are taxable and are not currently captured in the tax net: government should focus more effort in this regard than having to introduce more taxes on already heavily over – burdened industry.

“The CBN governor should be more concerned about how to stabilise the falling rate of the naira against major international currencies and give us access to foreign exchange to procure highly needed hardware and software to keep the industry running than recommending more taxes on telecom services.

“Any taxes on telecoms will have significant impact on our subscribers and threaten the growth of the industry.”

Similarly, the Association of Telecommunications  Companies of Nigeria (ATCON) described Emefiele’s suggestion as prescribing the wrong therapy for the ailing economy.

Its President, Mr Olusola Teniola, said the suggestion from the apex bank’s chief was technically and economically wrong as it will do no good to the economy.

“Contrary to the CBN governor’s belief, it is the poor people who make more calls than the rich. So, the proposal is not targeted at the middle or higher class. I have not seen any industry where you don’t want people to use your products or services more. We want people to be speaking longer,” he said.

Teniola said the proposal that people should cut their phone calls after three minutes had not been founded on any sound economic theory.

“In fact, you will now see that people will be cutting their calls. It does not make sense, not only technically but economically, to apply that kind of thinking as a tool or solution out of the present economic recession, it is not going to work,” Teniola said.

He said instead of the ‘calls tax’, ATCON had already proposed a one-per cent value added tax (VAT) increase across all sectors to the Senate leadership.

“This is a more realistic measure toward getting more revenue for the government,” Teniola said.

The ATCON president said the ICT industry is seen as the sector that would help lift the country out of recession, warning however that it should not be killed via excessive taxation.

The President, Nigeria Computer Society (NCS), Prof Adesola Aderoumu described the suggestion as dangerous, especially at this time when the average Nigerian is looking for what to eat.

He said the imposition of such a tax on the industry will not be in the interest of the nation, adding that the Federal Government should explore partnering with local ICT companies to proffer autochthonous solutions to the nation’s economic problems. “That is the way to go to salvage the economy and bring it out of recession,” Prof Aderoumu said.

Also reacting, the President, National Association of Telecoms Subscribers of Nigeria (NATCOM), Deolu Ogunbanjo, said if the CBN governor has run out of ideas on how to steer the economy to the path of recovery, he should seek advice from experts.

According to him, there are already about 26 different taxes and levies in the telecoms industry, warning that any additional tax, under any guise, will amount to an overkill.

He said telephony has become a source of succour for the poverty-ravaged masses of the country. He added that subscribers now take solace in their mobile phones to keep in touch with their loved ones.

According to Ogunbanjo, Ghana has reduced the duty payable for the importation of mobile phones from 50 per cent to 10 per cent while it has also reduced cost of acquiring subscriber identification module (SIM) cards from 20 per cent to 10 per cent.

In Liberia too, he said an attempt by the regulator to increase call tariff was resisted by the people about two weeks ago.

Instead of imposing additional yoke on the subscribers and the telcos, he said the Federal Government should tighten the noose around economic saboteurs, plug the remaining leaking holes in the system where tax payers’ money are frittered and also ensure that companies all companies remit VAT to the Federal Inland Revenue Service (FIRS).

Ogunbanjo lamented that some 70,000 companies operating in the country are still not captured in the tax net. “All these companies should be captured in the tax net; the telecoms industry is already reeling under heavy taxation. Inflation has taken a huge toll on workers’ disposable income while wages have not been increased,” he said.

The telecom sector added nearly N1.4 trillion (1.11 per cent growth in the real term) to the Gross Domestic Product (GDP) in the third quarter (Q3) of this year.

Reports released by the National Bureau of Statistics (NBS) at the weekend, showed that the sector contributed N1.398 trillion representing 1.11per cent addition to the GDP. Although this figure is slightly lower than the N1.5 trillion recorded in Q2 of this year, the NBS said the figures reflected the signs of the times.