English>

Market News

With new healthcare charge, Nigeria’s phone call tax up 300% in three years - PREMIUM TIMES

MAY 24, 2022

The taxes include a five per cent excise duty placed on telephone recharge cards and vouchers, nine per cent healthcare levy, and the 7.5% Value Added Tax (VAT).

By Oladeinde Olawoyin

With the introduction of the new tax on phone calls to fund the provision of healthcare to vulnerable Nigerians, sundry taxes on telephone calls in Nigeria have shot up by 300 per cent in the last three years.

The taxes include a five per cent excise duty placed on telephone recharge cards and vouchers, nine per cent healthcare levy, and the 7.5% Value Added Tax (VAT).

In effect, a total of 21.5 per cent tax has been placed on calls in Nigeria, a significant increase from the five per cent VAT charged on calls barely three years ago. This represents an over 300 per cent increase in taxes placed on calls by subscribers in the country.

Vulnerable Fund

The Nigerian government last week introduced a new tax on phone calls to fund the provision of healthcare to vulnerable Nigerians who cannot afford the cost of medical care. President Muhammadu Buhari said the National Health Insurance Authority Bill 2022 will ensure coverage of 83 million poor Nigerians who cannot afford to pay premiums.

The new law creates a vulnerable group fund that will be financed through a new telecommunications tax charged on phone calls at not less than one kobo per second of GSM calls. It will also be funded through a basic health care provision fund, health insurance levy, special intervention fund, as well as any investment proceeds, donations and gifts to the authority.

With an average call rate of 11 Kobo per second, the new law implies at least nine per cent charge on every second of phone calls in the country.

A phone call model used to illustrate the story

The new law comes into effect shortly after Mr Buhari approved the collection of five per cent as excise duty on telephone recharge cards and vouchers in May.

Earlier in the month, Nigeria’s Minister of Finance, Zainab Ahmed, directed the Nigerian Customs to create a tariff line for the collection of the excise on mobile telephones, electricity meters (components) and set up boxes at five per cent.

The government is expected to raise at least N150 billion from the duty while Customs will pocket about N10 billion, a 7 per cent collection fee.

In the first quarter of 2020, the Nigerian government increased the Value-Added Tax (VAT) rate from 5 to 7.5 per cent.

Impact

The new healthcare tax and its possible impact have generated conversations across social media platforms, with many Nigerians divided in their support of and opposition to the policy. While many praised the idea for its expected impact on the poor and vulnerable, others expressed reservation on the management of the fund.

In his intervention on Monday, Fiscal Policy Partner and Africa Tax Leader at PwC, Taiwo Oyedele, warned of the possible implication of burdening the telecom sector with taxes. According to the tax expert, the sector is linked to other sectors and the tax burden can affect the growth of other sectors of the economy.

“The telecom sector is an enabler for other sectors of the economy. It is important to avoid excessive taxation which may directly hamper the sector and indirectly hurt other sectors and the economy as a whole,” he tweeted.

There are concerns this might help increase the popuaton of financially excluded people. Increased tax can cut savings ad induce poverty, a driver of financial exclusion.


SEE HOW MUCH YOU GET IF YOU SELL

NGN
This website uses cookies We use cookies to personalise content and ads, to provide social media features and to analyse our traffic. We also share information about your use of our site with our social media, advertising and analytics partners who may combine it with other information that you've provided to them or that they've collected from your use of their services
Real Time Analytics