Nov 4, 2016

The Communication Service Tax Bill: A Desperate Cry For Help – Emmanuel Ohiri

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.



  1. Got some good ideas with your blog. Thanks!

  2. I think that the government should have to implement proper tax law because there are many investor who are still willing to land their business and pay good taxes as well.

  3. Wonderful article, thanks for putting this together!Voice services This is obviously one great post. Thanks for the valuable information and insights you have so provided here.

  4. Very nice your blog and article. I like this blog thank for sharing.



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