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FG introduces 5% excise duty on telecoms, betting to boost revenue

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The Nigerian government has introduced a new tax bill aimed at expanding its revenue base by imposing a 5 per cent excise duty on telecommunications, gaming, and betting services.

The bill, officially titled “A Bill for an Act to Repeal Certain Acts on Taxation and Consolidate the Legal Frameworks Relating to Taxation and Enact the Nigeria Tax Act to Provide for Taxation of Income, Transactions, and Instruments, and Related Matters,” was recently submitted to the National Assembly and is dated October 4, 2024.

This move is part of the administration’s broader efforts to overhaul the nation’s tax framework as fiscal pressures mount.

The proposed 5 per cent duty will affect all telecom services, both postpaid and prepaid, regulated by the Nigerian Communications Commission (NCC), as well as gaming, gambling, lotteries, and betting activities in the country.

According to the bill, these sectors will be taxed under the Tenth Schedule of the Nigeria Tax Act, marking a significant shift in the country’s revenue collection strategy.

Financial analyst, Adebola Ogunleye, noted that the excise duty on telecom services will likely increase costs for consumers, particularly in a market where telecoms have become essential to everyday life.

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“This 5 per cent duty will inevitably be passed on to consumers, raising the cost of data, calls, and mobile services. While the government needs revenue, this measure could be seen as regressive, disproportionately affecting lower-income users who rely heavily on mobile services,” Ogunleye said.

However, tax policy expert Dr. Chuka Nwankwo believes the move is necessary to diversify Nigeria’s revenue streams away from its heavy dependence on oil. “Telecoms and betting are fast-growing sectors with significant financial potential. The government is rightly targeting these industries to expand its non-oil revenue, and this excise duty could provide a stable source of income for the country,” Nwankwo explained.

The bill also introduces a provision to regulate currency transactions. Any differences between the official exchange rate from the Central Bank of Nigeria (CBN) and the actual transaction rate will now attract excise duties.

This means that any excess value derived from currency exchanges outside the official rate will be subject to self-assessed excise duty by the seller, as mandated by the Nigeria Tax Administration Act.

This regulatory move, according to economist Tunde Ayodele, is intended to curb the parallel market for foreign exchange and ensure more transactions occur within the CBN-authorized rates.

“The government is trying to tighten control over currency exchanges, which have been a point of economic vulnerability. By imposing duties on these discrepancies, they hope to close the gap between the official and unofficial exchange rates,” Ayodele said.

The new tax regime is part of the government’s strategy to increase non-oil revenues amidst rising fiscal deficits. With telecoms and gaming seeing rapid growth, authorities see these excise duties as a crucial tool to broaden Nigeria’s tax base. If passed, the bill will likely drive up the costs of telecom services and betting, while also strengthening the regulation of currency transactions.

As the bill moves through the National Assembly, stakeholders are urging the government to consider the economic impacts on consumers and ensure that revenue generated is effectively managed to avoid exacerbating poverty and inequality.

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