May 22, 2018

Why do we need the phone tax? – Tunde Gboyega

Why do we need the phone tax? – Tunde Gboyega

TELECOM SUBSCRIBERS TO PAY NEW 9% TAX ON SERVICES

Phone bills are likely to go up, given the proposal by the National Assembly to impose a 9% tax called the Communication Service Tax Bill (CSTB) which will be levied on service fees payable by users of electronic communication services and will be borne by customers (i.e. you and me), the categories of communication services liable to the tax includes voice calls, SMS, MMS, data and PayTV (DSTV, GOtv etc.)

Now as much as I applaud the FG’s drive to increase non-oil revenues via diversification… another tax… another drain on our diminishing disposable income?? Correct me if I’m wrong… but isn’t this the third charge introduced this year after (1) N50 Stamp duty charge (2) Negotiable Current Account Maintenance Fee (NCAMF). Na wa oo…

After crying in French for about 2 minutes… my curiosity got the better of me and I decided to do a little digging and found out that Ghana has a CSTB in place already (I started singing… You are not alone… (the Michael Jackson song)) and found some interesting facts:

Country NIGERIA GHANA
GDP $574 Billion $38.61Billion
Population 181,562,056 26,327,649
Telecom Subscribers 151,357,769 (Jan 2016) 35,008,387 (Dec 2015)
Teledensity (lines per 100 users) 83.4 133
Communications Service Tax Bill charge (CTSB) In-view (9% proposed) 6% (law since passed in 2008; amended in 2013)
CST Bill Revenue usage Government wacks everything

(via TSA)

20% used to fund the National Youth Employment Programme (NYEP)

 

The major issues that arose with the enactment of this CST Bill in Ghana were due to interconnectivity and which customer on whose network pays the charge? These were resolved via an amendment of the act in 2013.

Now Nigeria has decided to replicate this, but I’m curious as to why Nigeria with an economy that is 14X larger than Ghana based on current GDP numbers, a telecom subscriber base 4X larger and a lower teledensity would want to impose a higher tax? Using MTN as an example, MTN generated Half-year 2015 revenues of R24.65 Billion in Nigeria compared to R3.5Billion in Ghana. Total tax rate as a percentage of profit in Nigeria is 33.3%, in Ghana its 32.7% according to the World Bank’s Doing Business report. So why should we pay more in Communication Service Tax (CST) when telcos make more in Nigeria than in Ghana? This shouldn’t be!!

Now remember that Ghana also uses a portion of the revenues (20%) accrued to fund its National Youth Epmloyment Programme (NYEP) which was established in 2006 and has close to 500,000 beneficiaries … in Nigeria I doubt we’ll ever be that lucky!

Now as much as we’ve had some stability in terms of pricing of telecoms plans (prepaid or post-paid) in Nigeria, the truth is telecoms operators if the law is enacted will likely pass the costs to us consumers  as I don’t foresee a scenario where some of this cost will be borne by the telcos. The average pre-paid/post-paid customer pays between 15-40kobo/sec  on most tariff plans. This automatically increases the cost of calling by 9%… this means your calling time has been reduced by 9%… and we Nigerians can gist on phone shaa!!

Lest I forget if the CST Bill is passed … your DSTV/GOtv/ACtv… etc. will all go up by 9% that means DSTV premium (with dual view) hits almost N17,000 monthly while GOtv hits around N2,200 monthly.

Now with inflation almost hitting 10%, exchange rate at N320/$, and Nigerian consumers being hit with an average of 1 new (or proposed) /charge/ bill/fee/tax per month… these are indeed interesting times!

 

CRUDE OIL PRICE FINALLY RISES ABOVE NIGERIA’S BENCHMARK PRICE OF $38

Things are looking slightly rosier for Nigeria’s finances as the international price of crude oil closed at $38.72 per barrel on Friday. Talks among major producers, including Russia and OPEC members about freezing their output has boosted prices, as a meeting to discuss this is scheduled for March 20, 2016.

As much as I’m tempted to say “hurray” for Nigeria… finally we deserve some sort of luck… we should remember that the (1) global oil market still remains oversupplied with US inventories at 80-year highs and (2) IRAN has not indicated that it intends to join the freezing production plan and increased Iranian output would likely offset any decrease by other producers.

I guess the next two weeks will be very interesting since so much of our foreign exchange revenues (95%) are tied to the price of crude oil!… Watch this space!!

 

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