Suspension of 5% excise duty on telecom services will affect 2023 budget, says Akabueze

Ben Akabueze, director-general of the budget office of the federation, says the suspension of the five percent excise duty on telecommunication services will affect the 2023 budget.

Akabueze said this on Tuesday during an interview on Arise Television.

Reacting to the suspension of the planned 5 percent telecoms tax as announced by Isa Pantami, minister of communications and digital economy, Akabueze said it would harm the government’s financial projections for next year’s budget.

He also said the federal government may need to rework its recent medium-term expenditure framework (MTEF) due to the development.

Akabueze added that the MTEF document had already gone through a long process before its official endorsement, arguing that tampering with it would only negatively impact the government’s plan.

“I don’t know about the suspension. This is the law now. So, beyond what I have read in the media, we haven’t been advised in terms of the suspension. For instance, recently the Federal Executive Council (FEC) passed the MTEF for 2023-2025,” he said.

“The framework that the FEC passed includes projections for this tax. That framework is currently before the national assembly. Over the last two weeks, we have been holding meetings with agencies of government on this.

“If we are formally advised that this is no longer applicable, then we will have to rework that Medium Term Expenditure Framework.

“What that means is that the projected revenues will decline and the deficit will increase, which means that we either have to cut back on expenditure or increase debt.” 

“The MTEF proposal has a total of N19.76 trillion, with a proposed deficit of N12.42 trillion. We face critical fiscal challenges which we need to address.”

Speaking on taxes, Akabueze said companies operating in Nigeria are not over-taxed, compared to 21 other African countries with higher taxes.

According to him, the average effective tax rate (AETR) in some African countries, for the telecoms sector, which measures the percent of the income that an individual or a corporation pays in taxes, is currently over 90 percent.

He added that the matter had been extensively deliberated upon before it was released to the public.

“This wasn’t something that the ministry of finance woke up and introduced. The finance bill went through the FEC. It went to the national assembly as an executive bill from Mr. President. At the end of the day, it was passed and they signed it into law,” he said.

“We were engaging with customs and the Nigerian Communications Commission (NCC) about implementation.

On the rising fiscal headwinds, Akabueze said that Nigeria will seek relief from the International Monetary Fund (IMF) if it is unable to address its problems before they escalate.

“Essentially, there are two ways countries end up with the IMF. One is voluntary when they ask IMF for help, or when things get to the grind where they simply have no other option.

“I don’t see Nigeria going to the IMF voluntarily. It’s a hot issue here in Nigeria. But the truth is that if we don’t address our fiscal challenges sensibly and sustainably, we may end up unwillingly with the IMF, but Nigeria isn’t in that kind of desperate situation yet.

“If we continue to fund regressive deficits, it is tantamount to continuing to dig. If we continue to pass on reasonable opportunities to increase revenues by introducing taxes, it is tantamount to continue digging.

“Even though I said we should not cut expenditure in total, we need to get more efficient in our spending. If we don’t do that again, it is tantamount to continuing to dig.”