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In a significant move, the Federal Government of Nigeria has proposed a 5% excise duty on telecommunications services, gaming, and betting activities. This initiative is part of a broader effort to overhaul the country’s tax framework and boost non-oil revenue amidst ongoing fiscal challenges.
Details of the Proposal
The proposed tax is outlined in a new bill 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.” This bill was dated October 4, 2024, and has been submitted to the National Assembly for consideration.
According to the bill, excise duties will be applicable to various services, including:
- Telecommunications (both postpaid and prepaid services)
- Gaming
- Gambling
- Lotteries
- Betting
The bill specifies that the excise duty will be calculated based on the amount charged for these services by providers in Nigeria.
Rationale Behind the Tax
The government aims to widen its revenue base, particularly in light of rapid growth in the telecommunications and betting sectors. The introduction of this tax is seen as a strategy to enhance fiscal sustainability by increasing non-oil revenue streams.
A section of the bill states: “Services… provided in Nigeria shall be charged with duties of excise at the rates specified under the Tenth Schedule to this Act…” This indicates a structured approach towards implementing this new tax regime.
Implications for Consumers and Businesses
The introduction of this tax could lead to increased costs for consumers using telecommunications services as well as those engaged in gaming and betting activities. Analysts suggest that businesses may need to adjust their pricing strategies to accommodate this new financial burden.
Additionally, the bill includes provisions regarding currency transactions, specifying that any discrepancies between the Central Bank of Nigeria’s exchange rate and actual transaction rates will also be subject to excise duty.
Conclusion
As the government moves forward with this proposal, stakeholders in the telecommunications and gaming sectors will be closely monitoring its progress through the legislative process. The potential impact on consumers and businesses alike raises questions about how this tax will reshape these industries in Nigeria. Further discussions are expected as lawmakers deliberate on this significant fiscal policy change.
