Global tax and advisory firm, KPMG has criticized the federal government and Central Bank of Nigeria (CBN) on its move to implement the cybercrime levy stipulated in the 2024 Cybercrimes Amendment Act stating that no country can tax its way to prosperity.
The company while commenting on the new levy stated that there is empirical evidence to prove that higher taxes does not lead to sustainable growth and the timing of the implementation of the section of the Act is wrong considering the prevailing economic conditions in the country.
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It further noted that the need for revenue mobilisation in the face of significant challenges warranted the implementation of the levy despite provisions in the Cybercrime Act since 2015 even though the current economic challenges faced by citizens does not warrant introduction of new taxes.
It stated, “Given this context, government may go to any length to mobilize the required revenue. However, research has shown that higher taxes do not lead to sustainable growth. In fact, no country can tax itself to prosperity! Perhaps, it is in recognition of this that the current administration and the Presidential Committee on Fiscal Reforms have often emphasized that the government will not introduce new taxes.”
No cost benefit analysis on use of Cybersecurity fund
Also, the firm criticised the lack of a cost benefit analysis given multiple reports of about N3 trillion to be generated from the levy annually. It further advised that such levies should be accompanied by an adequate expenditure statement to justify them.
Furthermore, it questioned how the implementation of the act will drive financial inclusion across the country given the fear that individuals and businesses resorting to other forms of transaction.
It stated, “Various reports have indicated that Government will raise about N3trillion annually from the levy. However, there has been no formal presentation to the public of the cost and benefit analysis. It is always critical that the enactment of any tax or levy be accompanied by the tax expenditure statement to provide information as to whether the benefits of such tax or levy outweigh its cost.”
Backstory
Last week, the CBN mandated banks and Payment Service Providers (PSPs) to begin the deduction of 0.5% of the total transaction cost on online payments as cybersecurity levy to be managed by the office of the National Security Advicer (NSA).
- The apex bank warned that failure to comply with the directive will result in a fine of not less than 2% of the businesses annual revenue.
- Individuals and groups have come out to criticise the levy stating that it adds additional burden to business operation in the light of the current economic situation. The Centre for the Promotion of Public Entreprise (CPPE) had stated that the new levy may impede business growth and add to the hyperinflation being witnessed in the country.
- Also, the Nigerian Association of Chambers of Commerce, Industry, Mines, and Agriculture (NACCIMA) has asked the Federal Government and the Central Bank of Nigeria (CBN) to cap the maximum amount for the newly introduced cybersecurity levy at N500 to ameliorate the burden on the private sector.
