The new information communication technology (ICT) tax being considered by the National Assembly, Communication Service Tax (CST) Bill 2015, would prevent over 50 million Nigerians from being able to afford basic broadband connection besides widening the digital divide and slowing the momentum of investment in the industry. This was the position of the Alliance for Affordable Internet (A4AI)-Nigeria Coalition, contained in a statement signed by its National Coordinator, Dr. Ernest Ndukwe.

According to Ndukwe who was former Executive Vice Chairman, Nigerian Communications Commission (NCC), and the man who set the nation’s telecom’s sector on the path of a revolution the CST would do more harm than good to the industry as it would deny a critical population of Nigerians access to information via the internet. Such tax would increase cost of connection to internet and deny the vulnerable groups especially women access to internet.

In the growing global paradigm, women need access to internet for information of maternal healthcare, domestic violence and other development issues. The CST would deny the average Nigerian woman access to all of this.

The Coalition noted: “Balanced fiscal policy must consider affordability of broadband and ICT, and should not put into place additional barriers that would make internet access unaffordable for hundreds of millions of Nigerians. Nigeria is far behind the more developed countries of the world when it comes to broadband use, and the introduction of the CST will only widen this gap. The National Assembly must reconsider the passage of the CST and its impact on the development of broadband in Nigeria.  After such a review, if the introduction of a CST is deemed an absolute necessity, it must consider a lower tax rate than nine per cent: one that would enable it to achieve fiscal revenue targets without undermining broadband affordability and access.”

The group’s analysis showed that the proposed nine per cent tax to be levied on consumers of communications services would result in an additional 10 per cent of the population — equivalent to nearly 20 million Nigerians — being unable to afford a basic broadband access. The analysis suggested that the passage of such a tax is likely to threaten Nigeria’s ability to achieve its goal of 30 per cent broadband penetration by 2018 and undermine the socio-economic progress spurred by increased connectivity.

The CST Bill , currently before the National Assembly, would require consumers of voice, data, short message service (SMS), multimedia service (MMS) and pay TV services to pay a nine per cent tax on the fees paid for the use of these services. This tax would be collected in addition to the five per cent Value Added Tax (VAT) that consumers already pay when they purchase devices and communication services, the 12 per cent import duties paid on ICT devices, and the 20 per cent tax levied on subscriber identity module (SIM) cards. Mobile operators and service providers will be responsible for collecting consumer payments and must fulfill additional reporting obligations that are likely to increase operational costs and therefore service fees for consumers, the group warned.

Increasing access to internet and communication technologies is central to Nigeria’s development agenda. Though Nigeria can currently claim to have some of Africa’s most affordable internet prices (500MB priced at 5.4 per cent of average income in 2014), broadband penetration stands at just 12 per cent. The reality is that 40 per cent of Nigerians earn less than half of the average income; this means that a basic mobile broadband plan actually costs the majority of Nigerians anywhere between seven per cent and 18 per cent of their monthly income. The addition of this tax would increase the cost to connect across the board, with women and low-income populations likely to be the hardest hit, the group added.

Alliance for Affordable Internet (A4AI), Nigeria brings together prominent players from private and public sectors and civil society to provide a unified approach and coordinated focus in addressing the shared goal of open, affordable access to the Internet in the developing world.

A4AI ranks as the world’s broadest technology sector coalition with the desire for everyone, everywhere, to be able to access the life-changing power of the Internet affordably.

Its goal is to achieve the UN Broadband Commission target of entry-level broadband priced at less than five per cent of monthly income, thereby enabling billions more people to come online.

Below is a summary and recommendations by the Coalition:

• While the impacts on the CST on the sector as whole are major, the above analysis shows the direct, possibly unintended, impact on the consumer and specifically those in low-income groups and women.
• Balanced fiscal policy must consider affordability of mobile broadband and should not put in place additional barriers that make Internet access unaffordable for millions of Nigerians. This is important given the relative low levels of broadband Internet use in the country. Nigeria is lagging far behind the more developed countries of the world and introduction of the CST will further widen the gap.
• The goal of the proposed CST is to improve revenue generation as stated in the Bill (See Explanatory Memorandum in Bill). With that in mind we recommend that government should consider other alternatives
• Our position therefore is that the National Assembly reconsiders the passage of the CST bill. However if the tax must be introduced the government must consider a lower tax rate that enables it to achieve fiscal revenue targets without undermining broadband affordability and access.