Bill Proposes 9% Communication Service Tax

•  Passes first reading in Senate

Deji Elumoye in Abuja

Users of communication service providers in the country may have to pay nine percent service tax if the Communication Tax Bill currently before the Senate is passed by the two chambers of the National Assembly and assented to by President Muhammadu Buhari.

The Bill entitled ‘Communication Tax Bill, 2019 (SB.12)’ sponsored by Chairman of the Senate Committee on Army, Senator Ali Ndume, passed the first reading at plenary Wednesday.

The bill will now go for second reading before being referred to the appropriate committee for further legislative action including public hearing.

The proposed introduction of the tax, is meant to replace the 2.2% increase in the Value Added Tax being planned by the Federal government as announced by Finance and National Planning Minister, Zainab Ahmad, recently.

The Communication Service Tax Bill provides that the rate of the tax is 9% of the charge for the use of the communication service.

The Bill reads in part:
“There shall be imposed, charged payable and collected a monthly Communication Service Tax to be levied on charges payable by a user of an Electronic Communication Service other than private Electronic Communication Services.”

It further stated that “The tax shall be levied on Electronic Communication Services supplied by Service Providers.”

“For the purpose of this clause, the supply of any form of recharges shall be considered as a charge for usage of Electronic Communication Service.”

Specifically, the Bill provided that the Tax shall be levied on the such Electronic Communication Services like Voice Calls; SMS; MMS; Data usage both from Telecommunication Services Providers and Internet Service as well as Pay per View TV Stations,

If the bill is passed, “The tax shall be paid together with the Electronic Communication Service charge payable to the service provider by the consumer of the service.”

“The tax is due and payable on any supply of Electronic Communication Service within the time period specified under sub-clause (5) of whether or not the person making the supply is permitted or authorized provide Electronic Communication Services.”

The Bill also states that:
“The Federal Inland Revenue Service (FIRS) established under section 1 of the Federal Inland Revenue Service (Establishment) Act, 2007 shall be responsible for collection and remittance of tax, any interest and penalty paid under this Bill.”

“The FIRS shall pay the tax collected together with any interest and penalty into the Federation Account.”
The bill further provides that all service providers shall file a tax return to account for the tax.
“The tax return shall be in a form prescribed by the FIRS and shall state the amount of tax payable for the period and any related matters that may be required.

The return and the tax due to the accounting period to which the tax return relates shall be submitted and paid to the FIRS not later than the last working day of the month immediately after the month to which the tax return and payment relates.”

The bill also stated that “The FIRS may extend the period within which the tax return may be submitted and payment made on application in writing by a service provider, where good cause is shown by the applicant.
“The extension shall be communicated to the applicant in writing and shall state the circumstances under which the tax return shall be submitted for the particular period.”

“A service provider who without justification fails to submit to the FIRS the tax return by the date is liable to a pecuniary penalty of N50, 000.00 and a further penalty of N10, 000.00 for each day the return is not submitted.”

Sponsor of the bill, Senator Ndume while justifying the proposed tax said the imposition of tax on communication service is a better way of distributing wealth in such a way that would not affect the ordinary people.
According to him, increasing VAT would have very deadly effect on the economy as it could affect prices of goods and services and take them beyond the reach of the ordinary people.