…Directs Apex bank to withdraw ambiguous circular in existence
…LCCI commends lauds Reps over directive to Apex bank
…NESG faults timing of cybersecurity levy, says Nigerians battling high food prices
By Tom Okpe
The House of Representatives has directed the Central Bank of Nigeria (CBN) to suspend the proposed implementation of the cyber security levy of 0.5% on electronic transactions.
Consequently, the House directed the CBN to withdraw the ambiguous circular in existence and issue an unequivocal circular in line with letters and spirit of the Cybercrimes (Amendment) Act, 2024.
The Green Chamber also mandated its Committees on Banking Regulations, and other Ancillary Institutions to guide the CBN properly.
This followed adoption of a motion of urgent public importance, moved by the House Minority Leader, Rep Kingsley Chinda, (PDP Rivers) and 359 others.
Moving the motion, Chinda said CBN, through a Circular to all commercial, merchant, non-interest and payment service banks; other Financial Institutions, Mobile Money Operators and Payment Service Providers in the CBN Circular, dated 6th May, 2024; informed Nigerians of a proposed 0.5% levy on electronic transactions, in line with Section 44 (2) (a) of the Cybercrimes, (Amendment) Act, 2024.
He noted that Section 44 (2) (a) of the Cybercrimes, Prohibition, Prevention, (Amendment) Act, 2024 provides that, ‘a levy of 0.5% (0.005) equivalent to half percent of all electronic transactions valued, by business, specified in the Second Schedule to the Act’ be paid into the Cybersecurity Fund.
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“Further notes that businesses which the said Section 44 (2)(a) refers to, are listed in the Second Schedule to the Cybercrimes Act to be: GSM Service Providers and all telecommunication companies; Internet Service Providers; Banks and Other Financial Institutions; Insurance Companies and, Nigerian Stock Exchange.
“Concerned that the CBN circular mandates all Banks, Other Financial Institutions and Payments Service Providers to implement the Cybercrimes Act, by applying the levy at the point of electronic transfer origination as, ‘Cybersecurity Levy’ and remitting same.
“Further concerned that the word of the CBN Circular, leaves the CBN directive to multiple interpretations, including, levy’s to be paid by Bank customers, that is, Nigerians against the letters and spirit of Section 44 (2)(a) and the Second Schedule to the Cybercrimes Act, which specifies, businesses that should be levied accordingly,” Chinda said.
The lawmaker expressed worry that this act has led to apprehension as Civil Society Organisations and Citizens, taken to conventional and Social media to call out the Federal Government, give ultimatums for a reversal of the ‘imposed levy on Nigerians,’ among other things.
He argued that unless immediate pragmatic steps are taken to halt the proposed action of the CBN, the Cybercrime Act shall be implemented in error at a time when Nigerians are experiencing, aftermath of multiple removal of subsidies from petroleum, electricity and other rising inflation in the country.
Meanwhile, the Lagos Chamber of Commerce and Industry (LCCI) on Thursday commended the House of Representatives for asking CBN to suspend the planned 0.5 per cent cybersecurity levy due to public outcry.
The President and Chairman of the Council of LCCI, Mr Gabriel Idahosa, gave the commendation in an interview with the News Agency of Nigeria (NAN) in Lagos.
Idahosa was responding to the suspension of the 0.5 per cent cybersecurity levy on online transactions, which was earlier directed by CBN on Monday.
The LCCI boss, in an earlier interview with NAN, warned of backlash and called for reversal or suspension of the levy to prevent hardship.
NAN reports that the House of Representatives during the plenary on Thursday told CBN to withdraw the circular, which directed all banks to implement the levy two weeks after May 6.
Speaking on suspension, Idahosa said President Bola Tinubu’s administration had been a listening one, citing examples, including when it halted a policy on cash distribution.
“The Government has consistently shown their willingness to listen to the concerned public,” he said.
He also commended federal lawmakers for demonstrating their commitment to pursuit of policies accepted by the citizens, adding that policies succeed when the people and government are in agreement.
“So, we must commend the National Assembly that they are very much on the same page with Nigerians,” he said.
Idahosa, however, appealed to the federal government to expand its tax net to capture 60 per cent of critical stakeholders currently excluded from taxation to raise needed revenue to run Nigeria’s economy.
He said tax reform surveys revealed that countries with fewer taxes collected more revenue to fund large sectors of their economies.
Idahosa cited South Africa as an example of the most successful tax revenue collecting country in Africa with only about 10 items of taxes where they generated enough revenue to fund all sectors.
“The unmistakable data is that the countries that have fewer taxes collect much more taxes, so they have funds for all sectors of the economy.
“They collect very large level of revenue from the main taxes, corporate taxes and income taxes and they have money for health, education, cybersecurity, for everything under the sun,” he said.
He said the practice of collecting taxes for every sector or activities in the nation should be jettisoned for the adoption of the more effective collection methods of fewer taxes capturing critical stakeholders.
He said tax collection logistics was expensive, adding that 60 per cent of regular taxes in the nation were not being collected because of inadequate manpower to handle the collections.
Idahosa said if corporate and income taxes were collected through full coverage of Nigeria, the funds would be more than enough to meet national needs.
“So, the whole idea that for everything that happens you have to collect the levy, levy for ITF for training, levy for Police Fund, levy for cybersecurity, means first of all that the cost of tax collection rises heavily.
“These collections are not cost free. You are going to set up structures, computer systems and people to monitor collections. So, the cost of collection and revenue collected per tax begins to show diminishing returns.
“Rather, government should put its energy into expanding the collection of the main taxes. Corporate income tax, personal income tax, Value Added Tax (VAT). In fact, VAT alone can provide enough resources and raise the tax revenue to the GDP of Nigeria closer to countries like South Africa that are doing extremely well.
“So, the fundamental principle is that, you don’t have to collect tax for every little thing but focus on the capacity and the efficiency and the wide reach of your primary revenue collecting agency which is the Federal Inland Revenue Service (FIRS),” he said.
According to him, more than 60 per cent of the people who are supposed to pay corporate income taxes are not paying because the coverage of the FIRS has not been spread wide enough across the country.
“Outside the state capitals and a few big cities, you don’t see FIRS collecting taxes from all the companies in our sub urban areas.
“So, that is the basic principle, intensive collection from your primary revenue agency and having enough funds to meet the needs of all sectors and services in the economy,” he said.
The LCCI boss said the suspended 0.5 per cent cybersecurity levy came as a surprise because the federal government had set up a committee to reduce the total number of taxes in Nigeria.
He explained that there were about 100 different kinds of taxes being paid by the business community,
He said most businesses in the nation were currently running on either losses or survival profits due to current exchange rates, interest rates, cost of borrowing and other economic issues affecting the nation.
In a related development, the Nigerian Economic Summit Group (NESG) has faulted the timing of the introduction of the 0.5% cybersecurity levy on electronic transactions recently introduced by the Central Bank of Nigeria (CBN).
In a statement on Thursday, NESG asked the Federal Government to reconsider the levy as Nigerians are currently groaning under multiple taxation and inflationary pressures.
The Nigerian Economic Summit Group said “amidst the cost of living crisis exacerbated by rising inflation, the cybersecurity levy is mistimed”, considering the high rate of financial exclusion and increased currency in circulation.
“The NESG posits that the levy should be targeted at high-net-worth individuals and a specific amount transferred electronically to allay the fears of the populace, who are still battling skyrocketing food and non-food prices. However, if this policy remains, several Nigerians will boycott electronic funds transfers, which does not even bode well for the government due to revenue loss from electronic transfer levy.
“The NESG, however, feels this is a critical time to implement such a policy. The impacts of the fuel subsidy removal, exchange rate reform, and, most recently, the removal of electricity subsidies still permeate the operating costs of businesses and citizens’ welfare.
“The government must be cautious of the numerous strenuous policies that stiffen the purchasing power and welfare of corporations and individuals. Therefore, the government needs to properly sequence reforms for efficient socioeconomic outcomes, especially those that strain the people.”
NESG also raised concerns that the policy was introduced at a time when the Presidential Committee on Fiscal Policy and Tax Reforms has not finalised its mandate.
“To avoid conflict of interests and ensure no policy misalignment, the NESG strongly believes that the levy should be deferred and proper consultation until the Fiscal Policy Committee deems it necessary to implement it.
“The cybersecurity levy needs to be reconsidered, considering the CBN’s concern about the high rate of financial exclusion and increased currency in circulation.
“The cybersecurity levy adds to the list of levies and taxes collected by financial institutions on behalf of the government, including stamp duty, electronic transfer levy, and VAT. This embodiment of taxes increases the transaction costs of using a bank and could disrupt the financial intermediation role of banks.
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