Communications

It is apparent that the Bill is not people or industry-oriented…in an economy where most…citizens are still groping for stamina from its pummeling economic policies from other sectors. Nigerians must rise to reject the onerous provisions of the Bill as its reality portends hardship on them and will cause for a very dangerous precedence if not nipped in the bud.


The Nigerian Constitution provides for the powers of the National Assembly to make laws for the peace, order and good government of the Federation, especially with respect to matters contained in the Executive Legislative List, as set out in Part I of the Second Schedule to the 1999 Constitution of the Federal Republic of Nigeria (as amended). Item 59 in Part I under the Second Schedule provides the National Assembly with the specific powers to tax incomes, profits and capital gains.

Related to the foregoing, Chapter II of the same Constitution enjoins the government, which the National Assembly is part of, to harness resources of the nation to promote national prosperity and an efficient, dynamic and self-reliant economy. It is however unfortunate that this provision of the Constitution, which happens to be its most innovative aspect, in terms of democratic essence, is cosmetic – not one provision of the Chapter II of the Constitution can be adjudicated upon by any Nigerian Court by virtue of Section 6 (6)(c) of the Constitution. Considering the purport in the foregoing, it is well within the powers of the National Assembly to make laws with respect to taxes in Nigeria.

The Communication Service Tax Bill (SB. 164) of 2015 is a draft piece of legislation before the Nigerian Senate that seeks to levy a charge of nine percent for the use of communication services that include:

a. Voice calls;
b. SMS;
c. MMS;
d. Data usage both from Telecommunications Service Providers and Internet Service Providers;
e. Pay per View TV Stations, etc.

From the introduction of the Bill, it is apparent that it is a revenue-generating document for the Federal Government of Nigeria. In Section 1 of the Bill, the charge is expected to be paid by a user of an Electronic Communication Service. This is further confirmed by Section 2 of the Bill that says the final consumer will bear the weight of the charges at the point of purchase of the communication services.

To further consider the intendment of the Bill, Section 1(4)(e) of the Bill includes the word “etcetera” in its mention of areas where the charge of the nine percent tax will apply should the Bill be passed into Law. This literally means that other means of Electronic Communication Service that are not expressly included may be taxed subsequently.

In a nation facing the problems of a mono-economy, the telecommunications sector is touted as being a strong pillar to enable diversification. The Minister of Communications has described the telecommunications sector, strengthened by the ongoing roll-out of spectrum licenses for broadband services, as a potential cash cow and one considered important for the new economic diversification programme embarked upon by the Nigerian government. This suggests that the government is seeking to ensure better in-roads into the sector to help build its market and offer for competition among players in the industry to encourage the reduction of prices.

In an industry already being heavily driven by fines and penalties in the guise of sanitisation, no investor will be willing to operate at the whim of lawmakers and regulators who price filling their resumes with anti-people legislations over policies that drive market inclusion and productivity.


Introducing a tax regime that will be reluctantly borne by a final consumer through service providers does not in any way further this objective of the Federal Government. In an industry already being heavily driven by fines and penalties in the guise of sanitisation, no investor will be willing to operate at the whim of lawmakers and regulators who price filling their resumes with anti-people legislations over policies that drive market inclusion and productivity. Most of the companies expected to pay this proposed tax already contribute to the Universal Services Provision Fund, are expected to contribute to the National Information Technology Development Fund, and continue to pay other levies.

According to Section 4 of the Bill, the Federal Inland Revenue Service (FIRS) is the body responsible for the collection and remittance of taxes, as well as any interest and penalty paid under the Bill. The FIRS is the collection point for 19 other Acts of the National Assembly with respect to taxation, and this Bill, if passed into law, will make the 20th of such. How much has the FIRS been able to show for these collection tasks it is saddled with? What are the effective indicators in place to measure the overall performance of the FIRS through these Laws? How have the leakages associated with the FIRS’ collection models being blocked to justify the collection of another charge of nine percent from one of the busiest sectors of the Nigerian economy? What are the measures in place to justify the monitoring of collection, remittance and application of this service tax by the FIRS? More so, how has the Nigerian Communications Commission been able to justify the expenditure of the Universal Service Provision Fund (USPF) with respect to the utilisation of resources that accrue from the telecommunications sector?

Also, the filing of tax dues by the FIRS must be done every month by every service provider according to Section 5(3) of the Bill. From all indications, this is not an investor-encouraging policy nor is it a sector-stimulating practice to have industry players file monthly returns of taxes where administrative bottlenecks kill businesses faster than capital investments. Further down the Bill, the proposed legislation confirms its essence as a revenue-generation means other than offering for sectorial growth of the telecommunications sector which is needed to help position it for revitalising the dipping Nigerian economy. Section 5(6) of the Bill provides for punitive pecuniary measures of payment of fines for every day, not weeks, not months of default by the service provider to remit taxes due according to the Bill. The drafters of this Bill have unsuccessfully covered their original intention of milking to death a calf just happening on udders. Section 6 of the Bill further confirms this assertion by providing that service providers who do not pay on the due date will be liable to pay monthly interests on the tax due at a rate of one hundred and fifty percent of the average of the prevailing commercial Banks lending rate. This is not withstanding the provisions of Section 5(6) as earlier discussed. At this stage of the ICT sector, Funds that accrue from it are best applied for its development and not to be amassed for the Federal Government’s leaking purse.

Section 7(3) of the Bill is in direct correlation to the provisions of Section 39 of the Companies and Allied Matters Act, which exposes the directors of companies for the liabilities of their companies. This does not in any way encourage participation in the telecommunications sector which originally thrived on new entrants that drove down final prices through competitiveness. What is to be considered at this juncture is what value is being lost for a nine percent of charge. Also, Section 7(4) of the Bill further gives the FIRS powers to approach the Court to force companies to pay the Communication Service Tax. The Nigerian government is willing to go all out to kill participation in the telecommunications sector.

Section 8 of the Bill further grants the FIRS extensive powers to seize the goods and assets of a defaulting service provider with respect to the provisions of the Bill. This causes for operating in a climate of fear in the telecommunications sector. This will not only stifle competition that will drive down value-added services in the sector, it will cause for strangling of the final consumer as a result of the multiplier effect of the FIRS’ action on service providers. The thought bank of drafters of this Bill on preserving the poor in this current economic situation is empty. We are gradually being sent back to the era when basic amenities like communication services are a preserve of the rich.

The provision of Section 14(7) of the Bill also causes for a caustic telecommunications environment by providing for stifling measures against service networks that refuses to provide “unfettered” access to government agencies on its network. This will involve such service provider to pay another penalty of five percent of its annual gross revenue of its last audited financial statement failure of which will have the license of such service provider revoked after 90 days of non-compliance.


Putting Section 8(7) in perspective, the FIRS takes precedence in settlement should a service provider or any company liable to pay the task has execution levied against them. This raises bigger questions on the intent of the drafters of this legislation. What happened to consideration of public policy before governmental interests? For example, what happens where staff laid-off from a company are yet to be paid but the FIRS decides to take precedence? This undoubtedly shows the intendment of this Bill on how to it is willing to blindly go out for revenue generation regardless of what suffers. Considering the need to fund an economy that is looking away from oil, giving the FIRS such extensive powers to cudgel investors in the sector is overarching and seemingly obnoxious to industry players in the ICT sector. It is agreeable that the FIRS is a major plank for income towards a non-oil funded budget for 2016, must it be done at the expense of the poor?

Section 9 of this Bill is the twin of the section explained above. In its obnoxious character, the Bill asks for settlement of tax debts in any instance of receivership, liquidation or winding up processes. Section 12 of the Bill further confirms the docile nature of the Nigerian Communications Commission as it is to partner with the FIRS when as the Commission itself has reported there is already a sharp decline of users of mobile telephones in Nigeria from January to March of 2016. Nothing in the administrative wisdom of the Commission requires that this be looked into but it will rather connive to drive down the numbers of Nigerians served by the telecommunication sector through this Bill.

Another interesting provision of the Bill is the unfettered physical and electronic access to the nodes of every service provider’s network, according to Section 14 (3) (b) of the Bill. This stone-age thought pattern should not be found in the thought system of any 21st century economy seeking growth. Was the implication of actions like these considered by the drafters of this Bill? What fetters “unfetter?”

The provision of Section 14(7) of the Bill also causes for a caustic telecommunications environment by providing for stifling measures against service networks that refuses to provide “unfettered” access to government agencies on its network. This will involve such service provider to pay another penalty of five percent of its annual gross revenue of its last audited financial statement failure of which will have the license of such service provider revoked after 90 days of non-compliance.

The Communication Service Tax Bill seems very much like a copied work that has failed to take into perspective the peculiarities of the Nigerian telecommunications sector. The Bill has also provided the Nigerian government with the window of exploiting service providers which is eventually borne by the average Nigerian. The problem of tax collection is already a nagging issue which the Bill complicates by not taking into account means of collection and remittance of this particular charge by it. It is apparent that the Bill is not people or industry-oriented and the Federal Government must thoroughly justify the levying of a nine percent charge on a commodity as necessary as communication in an economy where most of its citizens are still groping for stamina from its pummeling economic policies from other sectors. Nigerians must rise to reject the onerous provisions of the Bill as its reality portends hardship on them and will cause for a very dangerous precedence if not nipped in the bud.

Tomiwa Ilori is the Project Assistant (ICT Policy) at Paradigm Initiative Nigeria. He has interests in Digital Rights and Inclusion in Nigeria. He can be reached via tomiwa.ilori@pinigeria.org