Suspension of 5% excise duty on telecoms industry will likely be lifted in the future – Taiwo Oyedele

The Fiscal Policy Partner and Africa tax leader at PwC, Mr. Taiwo Ayodele has stated in an interview with Nairametrics that President Tinubu’s executive order suspending the 5% tax on telecommunications will likely be reinstated in the future.

In his words “There could be a possible lifting of the suspension of the tax in the near future especially if some of the low revenue yielding multiple taxes payable by operators in the sector are repealed. The tax may be reinstated to compensate for the lost revenues either in its current form or with some modifications to ensure that the poorest subscribers are exempted. He also noted that the suspension won’t bring any impact on the profits of telecom operators. He stated thus

“Again, this will not have an immediate impact but rather it has prevented the industry from a possible decline in their profits which would have happened with the implementation of the tax resulting in higher charges and lower consumption” He went on further that the reason for the President’s actions stems from the outcry from operators about the multiple taxation in the industry. He mentioned specifically that there are over 33 taxes being levied on these operators.

He said “The suspension is in response to the outcry by the telecom sector operators regarding multiplicity of taxes. The industry is said to be saddled with over 33 different taxes. The executive order is one of the steps by the current government to address the concerns of the sector by suspending the tax to enable broader consultation and more effective implementation of the tax in future if necessary."

On whether the suspension will affect the government’s revenue, he said the Finance Act of 2022 birthed the 5% tax but has never been collected by the government and the conflicting positions of the ministers of finance and communications coupled with the incapacity of the customs who are mandated by law to collect it stalled the implementation.

When asked about the consequences of the tax on the government’s financial plans he said: “All the taxes which have now been suspended are either yet to take effect or haven’t been effectively collected to date. Therefore, there is no impact on the budget except to the extent that revenues from some of these taxes have been included in the budget. Based on the projected revenue details in the 2023 Budget, this does not appear to be the case.”

Mr Oyedele noted that the government has to be more strategic in its approach to taxing to prevent stifling economic growth. His words were

“It is clear that the present government intends to approach revenue generation from a more strategic perspective to enhance the collection efficiency of existing taxes rather than introducing new ones or increasing the rates of extant taxes. I think this is the right approach to achieve a sustainable tax system without stifling economic growth”

When asked about the impact of the suspension of the tax on competitiveness in the industry, the tax expert noted that competitiveness in the sector is not affected by local consumption taxes. He said,

“The Telecom sector’s competitiveness is not affected by local consumption taxes since such taxes will, in any case, apply to all players doing business in the sector and to all telecoms services consumed in the country.” Backstory

Nairametric reported the President’s signing of four executive orders, one of which suspended the 5% excise tax on telecom operators in the country as part of efforts to address the scourge of multiple taxation of businesses.

The President also delayed the implementation of the new finance act and suspension of import tax adjustment levy on certain vehicles.