Suspension Of 5% Telecoms Tax Will Widen 2023 Budget Deficit, Increase Govt’s Debt–DG Budget

The Director-General, Budget Office of the Federation, Ben Akabueze, has said he is unaware of any suspension of the proposed five per cent excise duty on telecommunication companies.

He said any attempt to suspend the tax will impact negatively on the execution of the 2023 budget and worsen the countries revenue problem.

He added that already, the excise duty has been captured in the Finance Act 2020, adding that any plan to suspend its execution would lead to reworking of the 2023-2025 Medium Term Expenditure Framework.

The DG who appeared on an Arise TV programme on Tuesday, warned that the projected revenue and the deficit in the 2023 budget will be impacted adversely.

He said, “I don’t know the suspension. This is law now, so beyond what I have read in the media, we haven’t been advised in terms of the suspension. For instance, recently the FEC passed the Medium-Term Expenditure Framework for 2023 -2025.

“The framework that the FEC passed includes projections for this tax. That framework is currently before the National Assembly. If we are formerly advised that this is no more applicable, then we will have to rework that Medium Term Expenditure Framework.

“What that means is that the projected revenues will decline and the deficit will increase which means that we either have to cut back on expenditure or increase debt.”

The 2023-2025 Medium Term Expenditure Framework submitted by the Finance Budget and National Planning proposed spending of N19.76trn; borrowings of N9.32trn; a deficit of N12.42trn and total projected revenue of N8.46trn.

The warning follows the announcement by the Minister of Communication and Digital Economy, Isa Pantami that the telecom tax implementation has been suspended.

The Minister of Finance Budget and National Planning, Zainab Ahmed and the Communications Ministry are at loggerheads on the telecom tax that has become a controversial matter in Africa’s biggest economy.

Before Pantami said the tax has been suspended, he had accused the Finance Ministry of not duly consulting the Communication Ministry, adding that he would “go behind the scenes and go against any policy that will destroy the digital economy sector. We will go to any extent to legitimately and legally defend its interest.”

But Zainab said “In view of the position of Prof. Pantami, there could be the question whether he was absented in the whole processes that resulted in the Finance Act, which is a product of both the National Assembly and Federal Executive Council.”

The Budget Office boss said the telecom companies in Nigeria are not overtaxed, adding that Nigeria has the lowest Value Added Tax for telecoms among 21 African countries.

Akabueze argued that Nigeria’s Average Effective Tax Rate (AETR) for telecom sector, which measures the percent of their income that an individual or a corporation pays in taxes is below the African average.

He said that Average Effective Tax Rate in some African countries is over 90 per cent, which amounts to over tasking of the industry.

The DG said, “It is a matter that will be reviewed in full course, but let me say something. I’m a member of the tax policy review committee which includes members of the private sector. In fact, majority of the members are from the private sector and we deliberated extensively on this matter before we arrived at including this in the Finance Bill for 2020.

“One of the things we looked at that time at least four years ago, at least 21 countries in Africa had excise taxes on telecom services. In all of these countries, also they had VAT rates that were on the average at least double the VAT rate for Nigeria.

“I assure you that the Average Effective Tax Rate (AETR) on telecommunications in Nigeria is below the African average. There are several countries in Africa where the AETR is over 90 per cent which is what is giving rise to the concerns that in some places, they may currently be overtaxed. But certainly not in Nigeria.

“Again, on this continent as of today, we have the lowest tax-to-GDP ratio and so, at the time when we face existential revenue challenges, I think that we all need to be really circumspect about what views that we take.
“This wasn’t something that the Ministry of Finance woke up and introduced. The Finance bill went through the Federal Executive Council, it went to the National Assembly as an executive bill from Mr. President. At the end of the day, it was passed and they signed it into law.

“We were engaging with customs and the NCC about implementation and then I remember the Chief Executive of NCC saying in accordance with their procedures, they would like to have an engagement with their industry practitioners on this to discuss the modalities for implementation and that was the last I heard.”