Senior Partner at Kreston Pedabo, Killian Khanoba, has warned that the implementation of 0.5 per cent cybersecurity levy on electronic transactions will affect the drive towards financial inclusion and cashless economy in Nigeria.
Khanoba pointed out that due to the rising charges associated with electronic transactions, small business owners would be inclined to conduct transactions in cash and the trend might intensify the demand for cash, leading to a deceleration in business transactions and potentially impacting the overall business environment in the country.
He also noted that with the ongoing discussions about reducing the number of taxes in Nigeria to a single digit, it would be difficult to argue that introducing cybercrime levy and in the way suggested by the CBN would be counter-productive to the efforts of the committee.
He pointed out that the new levy would lead to higher transaction and financing costs for everyone, businesses and individuals as the cost for MSMEs would be even more, given that small business owners more easily transfer money from business accounts to private accounts and vice versa.
He said: “Obviously, a lot of revenue will be collected via this levy, if the CBN successfully implements it as is. NIBSS reports that the value of electronic transactions rose by 55 per cent to N600 trillion in 2023. Even if this is discounted by 50 per cent to account for the exempted transactions per the CBN circular, it means that the government will generate about N1.5 trillion per annum, based on the 2023 volume! This is about eight per cent of the total revenue budget for 2024! The question that however stays unanswered is the cost to the overall economy,” Khanoba said.
He described the current setup of the levy as unwise, saying it should be postponed until it aligned properly with the overall tax framework of the nation, a task assigned to the Presidential Committee on Fiscal Policy and Tax Reforms.
“It’s worth noting that the government already imposes the Nigeria Information Technology Development Fund (NITDF) Levy on the same companies outlined in the Second Schedule of the Cybercrime Act, amounting to one per cent of their pre-tax earnings.
“So, why not increase the rate of this levy and allocate the proceeds to the diversified needs of the sector rather than institute a new levy? The danger with multiplicity of taxes and levies lies within the uncertainty that it creates in the economic environment, and the difficulty investors have in their investment decision-making with regards to the country,” he added.
