The Nigerian government’s plan to enforce a 9% Communication Service Tax (CST) for telecoms services has drawn widespread condemnation.

It is understood that revenue from the tax, which applies to voice, data, SMS, MMS and Pay TV, will be used to finance the Unemployed Youth, Elderly and Indigent Persons Sustainability Allowance Trust Fund.

“The Fund will be managed and utilised for the emergency needs of Nigerians including payments of stipends to the unemployed, subsidising infant drugs, hypertension drugs, diabetes drugs and other related matters,” said Taiwo Oyedele, tax partner at PwC Nigeria.

However, several stakeholders have condemned the move by the government, including former Executive Vice Chairman of the Nigerian Communications Commission (NCC), Dr Ernest Ndukwe.

Ndukwe, Nigeria’s National Coordinator for the Alliance for Affordable Internet (A4AI) warned the tax could slow down the growth of the country’s telecoms sector, and said that ensuring affordability is central to the enactment of policies for the sector.

He added the tax would be adding new barriers that Nigerians must scale to ensure internet access. “Balanced fiscal policy must consider affordability of broadband and ICT, and should not put into place additional barriers that would make internet access unaffordable for hundreds of millions of Nigerians. Nigeria is far behind the more developed countries of the world when it comes to broadband use, and the introduction of the CST will only widen this gap,” Ndukwe said.

He urged lawmakers to consider the implications of CST on the development of broadband in Nigeria.  “After such a review, if the introduction of a CST is deemed an absolute necessity, it must consider a lower tax rate than nine percent: one that would enable it to achieve fiscal revenue targets without undermining broadband affordability and access,” Ndukwe added.

20 million without internet

A report on the proposed tax issued by A4AI revealed that if the Nigerian government goes ahead with the tax, about 20 million Nigerians will lose internet access; these Nigerians, A4AI said, will also be unable to afford broadband access under the new tax regime.

The organisation says this would make it difficult for the country to achieve its 30% broadband penetration target for 2018, with ripple effects on internet-associated socio-economic indices.

Trending topic

The communication tax and became one of the trending topics on Twitter Nigeria.

Several comments monitored by ITWeb Africa suggest that those opposed to the tax base their argument on the current high cost of telecoms service and quality of service.

“As if Nigerians are not paying enough for such service, the government also wants to continue the habit of forcing the citizens to pay more. There are ways they can go about it without inflicting agony on the citizens and one of such blocking the numerous avenues the operators are using to cheat subscribers. I believe if they block all those ways and are collecting revenue from just one portal – say the tariffs on compulsory caller tunes, I think the citizens will not be complaining this much,” said Tayo Awodipe, an MTN subscriber.

Awodipe’s opinion is similar to several other respondents and the consensual perspective was that the government ought to first ensure quality of service is significantly improved across networks, and subscribers pay similar rates to those in other parts of the world.

Those who understood what the government planned to do with the money describe it as a noble idea, but urged authorities to find better ways to raise the required funds.

Not a new approach

This is not the first time the Nigerian government would be looking at the telecoms sector to raise funds.

In 2013, the NCC mandated telecommunication providers to pay 2.5% of their yearly income as operational levy.

It said the tax will be charged on the yearly revenue of both network and non-network providers, adding that the move was necessary since it was not receiving funds from the government to cover expenses.