1.     Introduction
On
31st August 2016, the National Bureau of Statistics of Nigeria (Bureau)
confirmed what was already in the minds of all Nigerians and the world- Nigeria
was in recession. From the Bureau’s Q2 report, Nigeria’s GDP declined to -2.06%
(year-on-year) in real terms. Rather than focus on alleviating the effect of
the recession, the National Assembly is contemplating levying taxes on communication
and internet services in Nigeria. 

This proposed tax is planned to come into
effect through the Communication Service Tax Bill (Bill) sponsored by Hon.
Saheed Akinade-Fijabi representing Ibadan North West/South West Federal
Constituency, which is currently at its second reading. The bill proposes a
seven percent (7%) tax on charges payable by a user (customer or a
subscriber)
of an electronic communication service by a Telecommunication
and or Internet service providers (“Service Providers”) in Nigeria. 
2.     Overview
of the Bill
2.1   The
Chargeable Services
Section
2(4) of the Bill provides that the Communication Service Tax (CST) shall be
levied on the electronic communication services supplied by Service Providers,
including the following:
(a)   Voice
Calls;
(b)   SMS;
(c)   MMS;
(d)   Pay
per view television stations; and
(e)   Data
usage from telecommunication services providers and internet service providers.
2.2  Persons
Liable to pay the Tax and Rate
In
addition to the electronic communication service fee payable by the user, the
Service Providers are required to impose the CST being 7% of the service charge
payable for the use of the communication service.
2.3  Collection
of Taxes and its Administration
The
Federal Inland Revenue Service (FIRS) will be responsible for the general
administration of the CST including the collection and remittance to the
Federation account.
2.4  Penalties
and Interests
The
penalties for non-compliance with the provisions of the Bill are:
a)    N100, 000.00 (One Hundred Thousand Naira) to be
paid by a Service Provider who without justification fails to file returns to
the FIRS by the stipulated date and a further sum of N20,
000.00 (Twenty Thousand Naira) for each day the return is not submitted.
b)   Failure
to pay tax by the due date attracts a monthly interest of 150% (One Hundred and
Fifty Percent) of the average of the commercial banks’ lending rate, as may be
published by the Central Bank of Nigeria from time to time, payable by the
defaulting Service Provider.
The
means by which FIRS may recover a tax or penalty of any interest, which remains
unpaid after its due date, include garnishee proceedings, an order to levy
distress on the property/assets/chattels of the Service Provider. The Bill
incorporates the provisions of the Value Added Tax (Amendment) Act 2007 with
respect to objections and appeals on tax related matters.
3.     Conclusion
The
Bill imposes an additional burden on the masses by imposing taxes on the users
of the electronic communication service, rather than taking steps to alleviate
the effect of the recession on the populace. The Bill also imposes significant
compliance burden and costs on the Service Providers. It is apparent that the
National Assembly has disregarded the resultant effect of the Bill on
low-income earners and small-scale business entrepreneurs who despite the
economic situation require telecommunication and internet services in their
day-to-day activities.
Multiple
taxation already exists in the information and telecommunications industry
alongside general tax requirement of companies in Nigeria, which include but
not limited to 30% Companies Income Tax, PAYE deductions for employees, 2%
Education Tax, 1% Industrial Training Fund Payroll contribution, and most
interestingly 1% Information Technology Tax (NITDA Levy) and 5% VAT on
consumption of their services. Clearly, the introduction of 7% CST increases
the tax burden on Service Providers and consequently their customers. 
It
is without doubt that any potential foreign investor would flee at the sight of
the ever expanding list of taxes imposed on companies in Nigeria. Indeed the
CST can be seen as a desperate attempt of the government to boost its dwindling
internally generated revenue in the face of the economic meltdown currently bedeviling
the nation. As such, this Bill must not be allowed to scale through the second
reading and must be strongly opposed at its “public” hearing.
By:
Emmanuel Ohiri (TNP)
Emmanuel
Ohiri is a vibrant and dynamic young lawyer with a high level of intellectual
curiosity, passion for perfection and tactical proficiency
.
Ed’s
Note – This article was originally published here.