- Presidential tax panel advocates allocating 90% of VAT revenue to states and LGs
Despite 16 payment exemptions listed by the Central Bank of Nigeria on the new cyber security levy, some Nigerians are seeking a review of the directive amid growing economic hardship in the nation.
The CBN on Monday directed banks and other financial institutions to implement a 0.5 per cent Cyber security levy on all electronic transfers.
The apex bank said the policy would take effect in two weeks, adding that the charges would be remitted to the National Cyber Security Fund, which would be administered by the Office of the National Security Adviser.
The analysis of the charge showed that N5 will be charged on every N1,000 transferred; N50 on N10,000; N500 on N100,000; N5,000 on N1,000,000; N50,000 on N10,000,000; and N500,000 on N100,000,000.
However, some concerned Nigerians who reacted to the policy urged the National Assembly to conduct a public hearing before the enforcement since Nigerians are already overburdened by various forms of taxes.
A development economist, Henry Adigun, said, “It is not about exempting some transactions; it is about the principle of tax. Nigerians are already overburdened; why burden them again? There is income tax, value-added tax, education tax, and even police tax. There are all manner of bank deductions and surcharges. Most Nigerians even pay for local security guards in the street because of insecurity. Why the cyber security levy again?”
In his reaction, the Chief Executive Officer, Centre for the Promotion of Private Enterprise, Muda Yusuf noted that businesses and citizens in general are yet to recover from the shocks of current reforms.
According to the former Director General of the Lagos Chamber of Commerce and Industry, inflationary pressures have not abated, the high cost of living is still a major worry, and operating and production costs for businesses remain elevated amidst weak consumer purchasing power.
“This is not a good time to impose an additional levy on businesses and citizens. The magnitude of the levy is even of a bigger concern.
“The expectations of citizens and corporate organisations are that taxes and levies are being rationalised and streamlined for a better business environment,” he said.
Commenting further on various forms of taxes in the country, Yusuf noted that businesses were already saddled with the following federal taxes: company tax, tertiary education tax, stamp duties, NITDA levy, value added tax, NASENI levy, police trust fund levy, among others.
“It has no regard to whether the business is healthy or not. Even loss-making companies are liable. The poorer segments of society are not exempted either. This raises serious issues of equity. There is also the issue of proportionality. That is relating the project objective to the amount of revenue being mobilised.
“By the account of the Nigeria Interbank Settlement System (NIBSS), electronic payments on its platform in 2023 was N600 trillion. 0.5 per cent of this is N3 trillion, “he added.
He pointed out that the industry data for electronic payments in 2022, according to the CBN website, were N1, 550 trillion and 0.5 per cent of this would give N7.75 trillion.
An economist, Marcel Okeke, has also condemned the decision of the CBN to introduce a cyber-security levy.
Okeke, a former Chief Economist for Zenith Bank Plc, said the decision to introduce the levy shows that the government appears insensitive to the feelings of Nigerians.
“This is one more tax too many, especially the timing,” he said, echoing the position of the Nigeria Labour Congress which rejected the levy.
“Why is it coming now when there is serious outcry in the polity about people suffering? We have a high rate of inflation, we have the Naira battered in the foreign exchange market, we have people going through all sorts of challenges and all that. And here we are hearing that another kind of tax is being introduced,” Okeke lamented during a live television programme on Wednesday.
Presidential tax panel advocates allocating 90% of VAT revenue to states and LGs
Meanwhile, the Presidential Committee on Fiscal Policy and Tax Reforms has proposed an adjustment in the distribution of Value Added Tax revenue, recommending that states and local governments receive 90 per cent, while the Federal Government’s share be reduced from 15 to 10 percent.
The committee also advocated for an increase in the current 7.5 percent fees that is being applied to customers.
Chairman, Presidential Tax Reform Committee, Taiwo Oyedele, disclosed this during a stakeholder meeting held in Abuja to deliberate on key highlights of the National Tax Policy.
He said, “We are proposing that the Federal Government’s portion should be reduced from 15 percent to 10 percent. States’ portion will be increased but they would share 90 percent with local governments.
“The burden of Value Added Tax should be with the ultimate consumer. So we must make it transparent and neutral and this is what over 100 countries where they have VAT are doing. Nigeria’s economy is more than 50 per cent in services and if I just stop at this, many states will be broke because VAT collection will go down by more than 50 per cent and it won’t even fly.
“So we therefore need to adjust the VAT rate upward. We would ensure that it doesn’t affect businesses. The only thing is to look at basic consumption from food, education, medical services and accommodation will carry zero per cent VAT. So for the poor and small businesses, no VAT.
“Then for the rest of us, we will pay a little bit more. We have spoken to businesses about it and they won’t increase the product price. We want to make sure when we do VAT reform, no one will increase the price of commodities. We will work out the mathematics with the private sector.”
“We are thinking that we should adjust the sharing formula for VAT because it is a tax of the states. In 1986, we had sales tax collected by states. The military came up with VAT in 1993 and stopped sales tax so they said it would collect VAT and return 15 per cent as cost of collection and that is the 15 per cent charged today. But we think it is too much.”
