Telecoms and professionals services boost the government’s revenue by paying the highest amount of income taxes
Telecommunications companies and other firms rendering professional services in the country paid a total of N180 billion as Company Income Tax (CIT) last year.
This is according to the data released by the National Bureau of Statistics (NBS). Driven largely by telecom companies, the amount paid by firms in this sector represented the largest paid by any sector in the period under review.
According to the NBS report, the company income tax from telecoms and professional services represented 22.8 per cent of the total CIT paid locally to the government in the 12-month, which stood at N790.6 billion.
A breakdown of the payments for the four quarters of the year showed that N28.8 billion was paid as CIT by the companies in the telecoms and professional services sector in the first quarter of 2020.
In the second quarter, N63.8 billion was paid, while payment for the third quarter stood at N55.5 billion. In the fourth quarter of the year, the sector’s CIT stood at N32.2 billion. Despite recording the lowest in the fourth quarter, the sector still generated the highest CIT in the quarter, according to NBS.
It was followed by Other Manufacturing, which generated N25.64 billion, Commercial and Trading generated N19.41 billion while Textile and Garment industry generated the least and closely followed by Mining and Local Government Councils with N104.37million, N136.99 million, and N298.73 million generated respectively.
Amidst complaints about the issue of multiple taxations in the telecoms sector, the immediate past President of the Association of Telecommunications Companies of Nigeria (ATCON),, Mr. Olusola Teniola, had recently disclosed that the telcos paid a total of N450 billion annually as taxes to the government.
This disclosure came on the heels of the proposed nine per cent Communications Service Tax on telecommunications services.
While the proposed tax is to be paid directly by the consumers of telecommunications services, and not part of taxes to be paid by the operators, an expected change in the pattern of consumption is bound to hit the operators’ earnings. “Telcos collectively pay N450 billion annually to government as tax and I say this conservatively.
If everything works well in the sector, the amount is bound to increase as operators generate more revenue. But with the nine per cent tax being proposed, communications will be out of reach for many Nigerians and the operators will lose revenue, which will also affect the tax being paid to the government from their earnings,” he said.
“If the bill becomes law, there will be a huge impact on revenue, and the tax payable by the telcos will reduce and may eventually lead to loss of jobs,” Teniola added.
He noted that the operators were currently dealing with 39 different taxes that apply to telecommunications operations and which also add to the cost of the services for the consumers.
He advised the government to look at ways of reducing the cost of governance in the country rather than imposing more taxes on the people.
Meanwhile, the global coalition for cheap internet access, Alliance for Affordable Internet (A4AI), has also advised the Nigerian government not to pass its Communication Service Tax (CST) Bill into law.
The body in its review of the bill said the nine per cent tax being pro posed on communication services would jeopardise the country’s target of 70 per cent broadband penetration by 2025.
While telecom operators in the country had also condemned the bill, saying it would lead to an increase in the cost of data and voice call for the subscribers, A4AI in its report of an assessment of the bill said: “CST Bill might impede telecoms service delivery to the people, and also likely to negatively affect increased broadband penetration as a result of increased charges.”
“The CST will effectively increase the cost of operations for all such businesses. The affected services will either become more expensive for consumers, or the providers will charge the same rates while absorbing the tax, as was the situation in Ghana until last month,” it added.
Noting that the Central Bank of Nigeria (CBN) and its partnering institutions are betting on Nigeria’s impressive mobile penetration number, which stood at 203 million as of August to widen the financial inclusion net, the group said this would also be affected by the CST. “The Communications Tax Bill would put the economic impact of mobile services at risk,” it added.