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Nigeria’s tax system may create social problems for government – Taiwo Oyedele

Taiwo Oyedele Fiscal Policy Partner and Africa Tax Leader at PwC

The Fiscal Policy Partner and Africa Tax Leader at PwC, Mr Taiwo Oyedele has warned that the continuous introduction of new taxes without considering the poor may create a social problem for the Nigerian government. Speaking against the backdrop of the recently announced 5% excise duty on telecommunications services, Oyedele said the tax system in Nigeria lacks intentionality as it creates no room for the protection of the poor and vulnerable.

According to him, an additional 5% tax on telecoms services will bring the total consumption tax on data and voice calls to 12.5%, when VAT is added. This, he said, will add extra burden on poor Nigerians who use telecommunications services, which have become essential needs for all.

Emphasising the importance of call and data services to every Nigerian, Oyedele noted that if Maslow’s Hierarchy of Needs theory were to be developed today, telecom airtime and data could have been properly classified along with food and shelter as physiological needs hence the need to ensure that government is not excessively taxing basic needs.

What Oyedele is saying

  • Speaking on the 5% excise duty on telecommunications services during a TV programme monitored by Nairametrics, Oyedele said: “When we impose a new tax without considering the poorest people who are just trying to survive, we are creating problems. If you are being intentional as a government, what you would have done is to start this tax by looking at the people at the middle and maybe even the upper class, who normally will do a post-paid.
  • “Or alternatively, you can create a threshold and say if your consumption of telecommunication services is 10,000. I’m just saying that number for the sake of this explanation, if your consumption is 10,000 or less than a month, you don’t pay this tax. Once you spend more than 10,000 on the extra amount you spend, you then pay. The fact is that no poorest people in Nigeria are likely to spend 10,000 Naira on telecommunication when many of them only earn 30,000 for a whole month to take care of the entire family.”
  • “So, I did not see this intentionality in our taxes and it’s quite unfortunate. If we continue in this pattern of just introducing taxes without looking at the social aspects; whether we’re protecting people poor, we will very quickly create a social problem, which can bring down the government, like we’ve seen in places like Sri Lanka, and I hope that doesn’t happen because it might be too late at that point to make the corrections that we should have made before,” he said.

Nigeria’s Minister of Finance had last week announced that telecommunications subscribers would soon be paying 5% tax on calls, SMS and data services.

In a development that showed the government contradicting itself, the Minister of Communication and Digital Economy, Prof. Isa Pantami, on Monday described the tax as unfair, saying he was not consulted before it was imposed. He vowed to explore every legitimate means to ensure the tax is stopped.

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