Pay television service provider, MultiChoice Nigeria, said it would commence the implementation of the new Value Added Tax, VAT, rate, which may lead to a hike in the prices of its DStv and GOtv packages, Vanguard has learned.
The new VAT regime, which came into effect on February 1, raised the rate of VAT from five percent to 7.5 percent on goods and services. Since coming into effect four months ago, MultiChoice has absorbed the 2.5 percent hike on behalf of its subscribers, an action that has kept that VAT rate at the pre-February rate of five percent.
Sources told Vanguard that there is no way the pay television giants can continue to pay the difference between the old and the new rates for much longer, as this has impacted very negatively on its finances.
The source said: “Pay television service is not exempted from VAT and I want to believe that MultiChoice is the only company still charging the old VAT rate on its products and services. It is important to note that VAT is not part of the turnover of companies, which they, in fact, collect on behalf of the Federal Government and remit same on a particular date.”
The source added that MultiChoice may have waited for four months to effect the new rate, in the hope that, as widely speculated, the Federal Government might revert to the old rate before the end of the first quarter of the year.
“There were speculations that the Federal Government would return to the old rate, but recent pronouncements by government officials that there would be no return to the old rate may have forced the company into a decision despite the best of intentions,” the source noted.
Another source told Vanguard that the pay-television company is also planning to phase out some of its legacy packages on DStv and GOtv platforms and replace them with new ones to create capacity for new content additions and give them distinct Nigerian identities.