The Nigerian Senate has proposed a Communication Service Tax Bill (2019) as extra revenue for the national budget. Communication service tax (CST) is a charge of 9% on electronic communication services such as voice calls, SMS, MMS, pay per view TV stations and data usage from telecommunication service providers and internet service providers. As a type of indirect tax, consumers of electronic communication service will be required to pay CST to the service provider. Furthermore, the supply of any form of recharge is a charge for usage of Electronic Communication Service.
The relevant tax authority for CST will be the Federal Inland Revenue Service (FIRS). A company that renders chargeable services will file a CST return on or before the last day of the month following the month of payment. Nevertheless, a taxpayer can request for extension of time to file a CST return which is subject to the fulfillment of specific conditions. In essence, FIRS has the discretion to accept or reject an application.
Late filing of CST returns attracts an initial fine of NGN 50,000 plus NGN 10,000 for every day in which the non-submission continues. For non-payment of CST, companies in default will pay monthly interest of 150% of the average lending rate of commercial banks. When a service provider does not grant the Government access to the network nodes, the penalty is 5% of the annual gross revenue in the last accounts.
CST aims to replace the controversial hike in the Value Added Tax rate by 50% which the Nigerian Senate rejected in October 2019. This is the second time the National Assembly has pushed for the taxation of communication services over the last five years. In 2016, telecommunication providers and key stakeholders opposed the first CST Bill 2015 as being regressive. One major issue was the tendency to transform a viable telecommunications sector into a less attractive venture for investors. More so, telecommunications companies are currently saddled with multiple taxation. They include;
- Value added tax: 5% on the supply of VATable goods and services
- Annual operating levy: 1% of turnover
- Information technology tax: 1% of profits
- Companies income tax: 30% of taxable profits
- Tertiary education tax: 2% of assessable profits
Thus, creating a new type of tax would generate more revenue for the government but to the detriment of telecommunication operators and the masses. The bill will move to a second reading before the appropriate committee takes a legislative action including a public hearing. If the Federal Government still intends to make Nigeria attractive for foreign and local investors, then the lawmakers should consider fiscal policies that are “business-friendly”.
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