The federal government has been going hard on tax reforms since October. With controversial taxes like the proposed increase in the Value Added Tax (VAT) we pay on things like food and electricity, nobody knows what to expect from the Tinubu-led administration these days.
For many reasons, the new telecom tax seems to be the most controversial of all the tax reforms I’ve written about this month.
What’s happening?
To the long-distance lovers who depend on voice and video calls to keep the spark alive and the remote workers who are already spending more than they should on data subscriptions, I’ll hold your hands gently while I tell you what the Tinubu-led administration has been up to lately.
The Federal Government wants to put a 5% tax on telecom services, meaning we’ll soon be paying more just to make calls and browse the internet. The bill has a weird long name (“A Bill for an Act to Repeal Certain Acts on Taxation and Consolidate the Legal Frameworks relating to Taxation and Enact the Nigeria Tax Act to Provide for Taxation of Income, Transactions, and Instruments, and Related Matters,”) and proposes an annoying increase in the cost of telecom services that over 215 million Nigerians use every day.
Here’s the craziest part- this bill doesn’t just target telecom services; it’s also going to introduce taxes on gaming, gambling, lotteries, and betting.
Why is this a problem?
Nigeria’s telecom sector already pays more than 50 different taxes to various government bodies –This is one of the main reasons why the cost of data has been on the rise recently. If they pay an additional tax like this bill wants them to, whatever increase you’ve noticed before will rise even higher.
If you add this to the proposed VAT increase (that could make food, electricity, shelter, and everything more expensive), you find that Nigerians already have many battles to fight.
What’s more? The World Bank recently announced that about 63% of Nigerian citizens are now poor, with most surviving on less than $2.15 daily. If there was ever a perfect time to come up with a tax like this, it’s not 2024.
Why is the government proposing this tax?
The government’s new tax reforms are part of a larger plan to make more money from non-oil sources. Since telecoms and betting are thriving industries, the government is taxing these companies (who will start charging Nigerians more as a result of these taxes) to boost the country’s revenue. This wouldn’t be such a bad thing if the government’s strategy was not so counterproductive. Indirectly taxing poor citizens to pour more money into the country’s economy is a questionable strategy, especially when President Tinubu’s previous reforms have not lived up to his promises. For a country that has a long and consistent history of corruption and funds misappropriation, this isn’t the smartest move.
What can you do?
Thankfully, there’s a chance that the proposed tax will not see the light of the day. Since telecom companies are affected too, they are fighting against the tax on behalf of Nigerians. This isn’t the first time the government is proposing this tax. They proposed it in August 2022 under the administration of former president Muhammadu Buhari, but telecom companies and Nigerians kicked against it till it was suspended in 2023,
The National Association of Telecoms Subscribers, who had taken the government to court over the tax before it was suspended in 2023, is getting ready to go to court again until the government withdraws the proposed tax.
It’s important to start and join in conversations surrounding controversial bills like this that affect all of us. Sharing this article is a great way to let other people know what is going on and keep the conversation going until the government withdraws the tax.
