Nigerian telecoms consumers to pay fresh tax on telephone calls

*The National Health Insurance Authority Act 2022 President Muhammadu Buhari recently signed contains a provision for the source of money for the ‘Vulnerable Group Fund’ to include telecommunications tax of not less than one Kobo per second of GSM calls

Gbenga Kayode | ConsumerConnect

The Federal Government has introduced a new tax on telephone calls to telecoms consumers in a move to fund free healthcare for about 83 million Nigerians the authorities recently noted constitute the Vulnerable Group in the West African country.

ConsumerConnect had reported the telecoms firms under the Association of Licensed Telecoms Operators of Nigeria (ALTON) recently announced its proposal to jack up tariffs of telecoms products and services by 40 percent in the country.

Though the professional group’s approach to effecting the projected price hikes in telecoms products and services by communicating same to the Nigerian Communications Commission (NCC) had been considered appropriate by some, the move generated much concern among millions of telecoms consumers, especially in view of the inflationary trend in the Nigerian economy.

The Association’s official letter stating its concerns and addressed to the NCC had attributed the proposed telecoms tariff increments to inflation and attendant rising costs of running their business.

The Telcos, among others, had requested the telecoms sector regulator for upward reviews in Voice Calls, Short Message Services (SMS) and Data Costs.

The leading industry Association, particularly, proposed an upward review of the price of calls to increase from N6.4 to N8.95, while the price cap of SMS would increase from N4 to N5.61.

Expatiating further on the The group said this had increased energy costs, increasing their operating expenses by 35 percent.

“ALTON considers it expedient for the telecommunications sector to undergo periodic cost adjustments through the Commission’s intervention to minimise the impact of the challenging economic issues faced by our members,” stated the Association in its letter to the industry regulator.

It also said: “With respect to Voice and SMS cost, ALTON respectfully requests the Commission to consider a mark-up approach to address the upward price adjustment desirable for the industry.”

However, the regulator in its reponse to ALTON’s request to effect increments, in a statement, said the NCC had noted the agitation to effect tariff hikes, and subsequent fears being expressed by telecoms subscribers over the move to jack up prices across Nigeria.

Mrs. Zainab Shamsuna Ahmed, Honourable Minister for Finance, Budget and National Planning

The Commission also stated: “For the avoidance of any doubt, and contrary to MNOs’ agitation to increase tariffs for voice and Short Messaging Services (SMS) by a certain percentage, the Commission wishes to categorically inform telecoms subscribers and allay the fears of Nigerians that no tariff increase will be effected by the operators without due regulatory approval by the Commission.”

The regulator re-emphasised that “tariff regulations and determinations are made by the Commission in line with the provisions of Sections 4, 90 and 92 of the Nigerian Communications Act (NCA) 2003.”

NCC said: “The regulatory instrument entrusts the Commission with the protection and promotion of telecoms consumers’ interest against “unfair practices, including but not limited to matters relating to tariffs and charges.”

Introducing the new 9 percent tax on GSM calls

Nonetheless, according to the Federal Government in the National Health Insurance Authority Bill 2022 President Muhammadu Buhari signed recently, the telecoms tax in the equivalent of a minimum of a Kobo per second for phone calls is part of the “sources of funds required to finance free healthcare for the Vulnerable Group in Nigeria”.

The provision is contained in the National Health Insurance Authority Bill 2021 that President Muhammadu Buhari signed into law lately.

The Act includes a provision under Section 26, Subsection 1C, which states that the source of money for the Vulnerable Group Fund includes telecommunications tax, not less than one Kobo per second of GSM (Global System for Mobile Communications) calls.

Taiwo Oyedele, Fiscal Policy Partner and Africa Tax Leader at PricewaterhouseCoopers, said: “S.26 of this new law imposes a telecommunications tax of not less than 1 Kobo per second on GSM calls.

“With call rates at about 11 Kobo per second, this translates to a 9 percent tax on GSM calls.

“The tax is one of the sources of money to the Vulnerable Group Fund to subsidise the provision of healthcare to the group defined to include children under five, pregnant women, the aged, physically and mentally challenged, and the indigent as may be defined from time to time,” reports Vanguard.

The Act also states the Vulnerable Group Fund is money budgeted to pay for healthcare services for vulnerable Nigerians who cannot pay for health insurance in a bid to subsidise the cost of provision of healthcare services to vulnerable people in the country.

The Federal Government further stated that in respect of funding for the healthcare scheme, the new Healthcare Insurance Authority Act provides several options, such as basic healthcare provision fund to the authority; health insurance levy; telecommunications tax, not less than one kobo per second of GSM calls; and money that may be allocated to the Vulnerable Group Fund by the Government.

Others are the motley that accrues to the Vulnerable Group Fund from investments made by the Council, grants, donations, gifts, and any other voluntary contributions made to the Vulnerable Group Fund.

Every resident in Nigeria is expected to obtain health insurance in line with the provision contained in the new Act.