Value Added Tax Rates on Telecommunication products and services: A call for Re-evaluation


By Isimeme Mary Andrew.

The Paper proffers viable recommendations that look to address the agitations of Nigerians over increased Value Added Tax (VAT) rates on telecommunication products and services purchased by subscribers.

The Finance Bill 2019 was presented to the National Assembly by President Muhammadu Buhari on the 8th of October, 2019 alongside the 2020 Executive Budget Proposals and 2020 Appropriation Bill.

During the presentation, Mr. Buhari had said the bill, when passed into law, will fulfil five strategic objectives “in terms of achieving incremental, but necessary, changes to our fiscal laws.”

The major highlight of the bill was the review of VAT rate from 5 to 7.5 percent, the reform of domestic tax laws to align with global best practices (such as taxes of digital business and e-commerce) and introduction of tax incentives for investments in infrastructure and capital markets.

The President gave his assent to the bill on the 13th of January, 2020 to kick off a new tax regime in the country.

Consequently, the Association of Licensed Telecommunications Operators of Nigeria (ALTON) notified customers that it will henceforth adjust all purchased telecommunication products and services to reflect the 7.5% VAT regime with effect from the 1st of February, 2020.

Many Nigerians have continued to register disgruntlement over the increased VAT on call and text messaging services and have kicked against the application of the new rate on mobile calls, SMS, and data subscription plans. Some Nigerians have described the increase as being contrary to the government’s promise to reduce the economic plight of ordinary Nigerians who will now have to spend more on communication.

The Minister of Communications and Digital Economy, Dr Isa Pantami, has asked subscribers who have expressed concern over the additional charges on voice calls, SMS and data to direct their grievances to the Federal Inland Revenue Service as the FIRS is the appropriate agency vested with the responsibility of handing issues relating to tax.

It goes without saying that the 7.5% new VAT rate is an additional burden on Nigerian citizens and investors and we obviously cannot turn a blind eye towards the reaction and complaints over the recent ‘outrageous’ charges on calls and text messages by telecommunication service providers obviously as a result of the increase. However, from a realistic viewpoint, a campaign for an outright elimination of VAT rates on telecommunications services and products may not see the light of day.

A more realistic option is a collaboration between the ALTON, Minister of Communication and the Federal Inland Revenue Service to set mechanisms in place for the purpose of reviewing these charge rates. It is our recommendation that a circular be issued to all Mobile Network operators directing that rather than charge Value Added Tax on each and every call made by a subscriber, VAT charges should be restricted to “single airtime recharge” made by customers, thereby eliminating VAT charges on calls and text messages. This means that a subscriber who recharges the sum of 200 naira will only be charged 7.5% VAT on the recharged airtime and not on every single call or text messages made on the recharged sum.

We believe the above recommendations, implemented alongside other similar palliative measures aimed at cushioning the effects of the recent VAT increase, will go a long way in addressing the agitations and complaints by Nigerians in respect of VAT rates on all purchased telecommunications services and products.

DISCLAIMER: This article is only intended to provide general information on the subject matter and does not by itself create a client/attorney relationship between readers and our Law Firm or serve as legal advice. We are available to provide specialist legal services on specific circumstances.

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