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Economic experts have urged the Federal Government to encourage the digital economy rather than burden it with over-taxation.
According to them, too many taxes in the digital economy will stifle growth rather than encourage productivity in the sector. They stated that if the sector grows, its tax remission to the government will do likewise.
This is coming on the heels of the Federal Government’s recent suspension of plans to introduce a five per cent excise duty on telecommunication services in the nation. If it had gone through, it would have increased the consumption tax on telecom services to 12.5 per cent.
The five per cent tax was introduced to cushion the effect of debt servicing and rising fiscal deficit, and low revenues.
This was opposed by telecom players, and the entire ICT sector. According to them, the Federal Government has already imposed large and multiple taxes on the sector despite the increasing cost of network expansion, and operational costs.
The government recently suspended its proposed new tax on phone calls and other telecom services. The Minister of Communication and Digital Economy, Isa Pantami, who made the announcement, argued that the sector was already paying 41 different taxes.
Commenting on the government’s action, an economic expert and academic at the University of Uyo, Professor Akpan Ekpo, said the government should encourage the telecom sector by not over-taxing its players.
Ekpo said there were too many taxes in the ICT sector , arguing excessive taxation could impede the growth of the digital economy. He claimed it was the right decision to suspend.
He stated, “There are taxes already and if the government needs revenue, there is something we call tax burden. You can overtax and it becomes a problem. Besides, there are several taxes at the state and Federal Government levels, so why create a burden and discourage investors in that sector?
“So, the minister was correct. He is right. The sector is growing. When you say the government needs revenue, yes, but the government should also look at the other side of the fiscal policy. How about the expenditure side?
“Taxation is good but you can overtax and create a problem. If the digital economy is growing and you want to gain from the fourth industrial revolution which is technology driven you have to be careful how you tax so as not to discourage investors in that sector.”
The Director, Research and Strategist, Chapel Hill Denham, Tajudeen Ibrahim, said the suspension of the telecom tax was the first step in the right direction, considering the financial burden effect on people.
He stated, “The suspension is a right move by the government because of the burden on the consumer wallet, and in addition, the suspension will allow the industry to further strengthen its growth trajectory in terms of investments. On those two fronts, it is good that the government decided to suspend the tax.”
Speaking on the alternatives for the government to fund its fiscal deficit, which is 5.5 per cent of the nation’s GDP, Ibrahim said, “They should block the leakages where the revenues are being stolen by some people. If they can block these leakages in revenue income, we should have an accretive impact on government revenue.
“They should first sort that out before talking about increasing tax on the telecom sector. That sector is doing well and the government should not stifle its growth via excessive taxes and charges.”
A renowned economist and Chief Executive Officer of Financial Derivatives Company Limited, Bismarck Rewane, indicated that FG’s decision on tax was the fate of countries around the world.
He added, “You are the same people that say the government has no revenue; so how are they going to pay for it if they don’t raise taxes? Every country in the world is raising taxes if they can. It’s a good idea but maybe the timing is not right because we are in the middle of a political season.”
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