ZACCH ADEDEJI’s PRINCIPLES OF TAXATION: A PATHWAY TO NIGERIA’S ECONOMIC GROWTH
Abdulahi Ismaila Ahmad, PhD Since the assumption of Zacch Adedeji, Ph.D to office as the Executive Chairman of the Federal Inland Revenue Service (FIRS), I have followed keenly his enunciation of his principles of taxation, which, to my mind, can translate to a pathway to Nigeria’s economic growth. To be sure, Adedeji’s principles of taxation embody some of the normative principles of taxation, which are certainty, flexibility, equity, simplicity, and utmost good faith. At every given forum, Adedeji does not fail to reify his wholesome principles of taxation. He is wont to say that, “we will tax the fruit, not the seed; we will tax prosperity, not poverty.”These are statements of certainty and equity, which are altogether refreshing and reassuring. The reassurance in his statements is underlined by his insistence that his tax principles are focused on encouraging taxpayers to grow their investments or income so that they can yield enough taxable dividends or profits. In his most philosophical best, he compares taxpayers to gardeners and the taxman as one who waters the garden. He says it is the duty of the government to create a conducive environment for taxpayers and their businesses to thrive in the hope that once they have a fulsome yield, they will gladly pay their taxes. That is why he says the taxman is not aiming to tax poverty but prosperity. Adedeji’s principles of taxation anticipate economic boom and discourage tax hikes in times of economic depression. The flexibility principle provides that the amount of tax charged should not be the same all year round; and, that tax rates should be lowered for other social benefits during economic boom, while during economic depression tax rates may be raised to raise maximum funds for developmental projects. Adedeji’s taxation principle does not support tax hikes that will become a burden on the taxpayers or the citizenry. Thus, it is obvious that Adedeji’s taxation principle takes cognizance of the fact that taxation is the lifebuoy of the economy. It is the fecund source of economic development. It follows then that when taxes are collected and properly utilized in grooming businesses, empowering citizens through access to low interest loans and grants, diversification of business activities like the creation of value chains, and provision of critical social amenities, there will be enough income in the pool to tax. In other words, there will be enough fruit from which to pick. Recently, the federal government took the right step in the right direction by establishing the Consumer Credit Scheme, which guarantees access to loans facility for the citizenry to grow their business activities. The logic here is that once there is a boom in economic activities in the informal sector of the economy, there will be a corresponding widening of the tax net without complaint from the tax paying community. It is this veritable connection between taxation and economic growth that Adedeji’s principles of taxation seek to highlight, making them the pathway to Nigeria’s economic growth. In concrete terms, Adedeji’s unwavering commitment to expounding his taxation principles has already raked in more than Three Trillion naira in tax revenue in the first quarter of 2024 for the three tiers of government in aid of the execution of the Renewed Hope Agenda of President Bola Ahmed Tinubu. In addition to raising this much revenue, Adedeji has also reorganised the structure of the service to reflect his taxation principle of customer-centricity. He believes that taxpayers should form the focal point of the operations of the Service, and that regard, they be treated with due diligence. Presently, the Service is structured based on the category of taxpayers: Large Taxpayers Group, Medium Taxpayers Group, and Small Taxpayers Group; as well as five other services groups, viz, Corporate Services Group, People Services Group, Support Services Group, Compliance and Enforcement Support Group, and the Special Duties. This taxpayers-based operational categorisation is purposely to simplify tax payment processes, which is made more so by the introduction of the various automation platforms. And so, it is always both refreshing and reassuring to listen to Adedeji marshals his thoughts around the issue of making taxation the pivot of national development. He often couches his statements in literal parallelism, metaphor, and humour. This rare sagely gift sets him apart as a conscientious taxman. Beneath his jocular mien lies a determination to set Nigeria’s fiscal trajectory and tax system on the pathway of sustainable economic growth. ABDULLAHI ISMAILA AHMAD, PHD Director of Communications and Liaison Department, Federal Inland Revenue Service (FIRS) Abuja.
Cybersecurity Levy Targeted at Financial Institutions, Telecoms, Not Individuals, Senator Buba clarifies
Senator Shehu Umar Buba, the Chairman of the Senate Committee on National Security and Intelligence, has clarified that the recently imposed cybersecurity levy announced by the Central Bank of Nigeria (CBN) is not targeted at individuals or ordinary bank customers. The Senator who sponsored the amendment bill told Economic Confidential that the levy is aimed explicitly at financial institutions and telecom companies, the most vulnerable sectors to financial crimes and cyber fraud, to enhance cybersecurity measures and national security in the country. He noted that the relevant section of the Cybercrime Act is very clear about the businesses that are required to pay the levy, not the citizens. “The Act is very explicit about who is responsible for the payment, not Nigerian citizens or individuals. The relevant Section of the Cybercrime Act 2015 listed the businesses required to pay the levy: telecommunications companies, Internet Service Providers, Banks, Insurance Companies, the Nigerian Stock Exchange, and other Financial Institutions. “The organisations in the sectors have been listed in previous circulars by the Central Bank of Nigeria, especially in 2018. The new circular by the CBN further provided many exemptions.” Senator Buba also clearly explained the amount payable as a cybersecurity levy. “It is either 0.005 or 0.5% arithmetically. The figure in the principal act was 0.005 as a fraction, which was converted to the percentage that became 0.5% in the amendment. Therefore, the statistics in fractions and percentages are the same. The legislator highlighted that the passage of the amendment bill was a collaborative effort of various stakeholders. “The passage of the amendment bill was a collaborative effort involving the government, industry players, civil society, and academia in the contributions and active participation in the public hearing before and endorsement by the two chambers of the National Assembly. After rigorous processes, President Bola Ahmed Tinubu signed the bill into law in February 2024.” The Senator acknowledged the concerns of Nigerians, civil groups, and other stakeholders about the current economic situation but was reassured that implementing the cybersecurity law was not meant to punish citizens. He emphasised that the levy is a collective effort to protect national security and the economy, with the financial burden primarily falling on the specified businesses. The Cybercrime (Prohibition, Prevention, etc.) (Amendment) Act 2024, which President Tinubu signed into law in February, imposes a 0.5 percent (0.005) levy equivalent to half the value of all electronic transactions by the businesses specified in the Second Schedule of the Act. The levy will be remitted to the National Cybersecurity Fund, which the Office of the National Security Adviser (ONSA) shall administer. The circular announcing the levy also exempted some transactions from the cybercrime levy, including loan disbursements and repayments, salary payments, intra-account transfers, and other financial transactions.
Cybersecurity Levy Not Punitive – Sen Buba,
The Chairman of the Senate Committee on National Security and Intelligence, Senator Shehu Umar Buba, has addressed the controversy surrounding the proposed implementation of the Cybersecurity levy by the Central Bank of Nigeria (CBN). The levy is provided for in the Cybercrimes (Prohibition, Prevention, etc) (Amendment) Act, 2024. He clarified that the levy is not punitive as it has numerous exemptions to protect and relieve ordinary citizens, particularly the poor. According to him, the exemptions include salary payments, intra-account transfers, loan disbursements and repayments, and other financial transactions. Senator Buba said the amendments to the Cybercrimes Act were a collaborative effort with the National Assembly’s ICT and Cyber Security Committee. The committee also underwent a transparent public hearing process, receiving contributions from various stakeholders. Both Houses of the National Assembly unanimously passed it before President Bola Ahmed Tinubu signed it into law. Senator Umar emphasised that the provisions for the cybersecurity levy have been in place since 2015 but were delayed due to unclear interpretations and applications. “The Cybercrimes Act of 2015 has provisions for imposing a cybersecurity levy since its enactment, but the vagueness of Section 44 led to different interpretations until the 2024 amendments. The levy is 0.5%, equivalent to half a per cent of the value of all electronic transactions by businesses specified in the Second Schedule to the Act. “The amendments addressed crucial gaps in the Act and empowered the nation to implement the National Cybersecurity Programme effectively. They also seek to realign and empower the country to combat the inadequate funding and disruptive effects of cyber threats on national security and critical economic infrastructures,” he said. Senator Umar underscored the criticality of the cybersecurity levy’s implementation, stating that its prudent utilisation will bolster the nation’s capacity to evaluate, execute, upgrade, and fortify the security of national critical economic infrastructure, thereby safeguarding the nation’s cyberspace. The Committee commended the Office of the National Security Adviser and the Central Bank of Nigeria (CBN) for initiating the operationalising the cybersecurity levy, highlighting its benefits far outweigh its drawbacks. He expressed appreciation to the leaders and representatives of MDAs at the federal and state levels, as well as to all stakeholders who contributed to this effort’s success. While maintaining that the Committee’s mandate is to create laws that align with the aspirations of Nigerians, he appealed for public support, assuring that the policy will yield maximum benefits for citizens in the shortest possible time. Following the enactment of the Cybercrime (Prohibition, Prevention, etc) (Amendment) Act 2024 and under the provision of Section 44 (2)(a) of the Act, a levy of 0.5 per cent (0.005) equivalent to half per cent of all electronic transactions value by the business specified in the Second Schedule of the Act is to be remitted to the National Cybersecurity Fund, which the Office of the National Security Adviser shall administer. Though the announcement created controversy, the circular exempted some transactions from cybercrime levy. The exemptions included loan disbursements and repayments, salary payments, intra-account transfers within the same bank or between different banks for the same customer, intra-bank transfers between customers of the same bank, and Other Financial Institutions (OFIs) instructions to their correspondent banks. The exemption also applies to interbank placements, banks’ transfers to CBN and vice versa, inter-branch transfers within a bank, cheque clearing and settlements, and Letters of Credit (LCs). Others include banks’ recapitalisation-related funding only bulk funds movement from collection accounts; savings and deposits including transactions involving long-term investments such as treasury bills, bonds; and commercial papers; government social welfare programmes transactions, e.g. pension payments; non-profit and charitable transactions including donations to registered non-profit organisations or charities; educational institutions transactions, including tuition payments and other transaction involving schools, universities, or other academic institutions.
TUC Threaten Nationwide Strike Over Cybersecurity Levy
The Trade Union Congress (TUC) has threatened a massive protest that will shut down the Nigerian economy should the Federal Government fail to cancel the controversial cybersecurity levy recently introduced by the Central Bank of Nigeria. The TUC in a statement signed by its President, Festus Osifo, on Wednesday, slammed the directive by the CBN to banks imposing a 0.5 per cent cybersecurity levy on almost all electronic transactions. This is after the Nigeria Labour Congress (NLC) had heavily criticised the levy which it described as another burden on Nigerians. Adding to the deluge of condemnations that have greeted the introduction of the levy which the CBN said will take effect in two weeks from May 6, the TUC said it is illogical that this is coming at a time that Nigerians are grappling with the high cost of living that is imposed by the devaluation of Naira, hyper hike in the cost of Petrol, supersonic increment in the cost of electricity tariff, etc. The union said it is disturbed that since the inception of the President Bola Tinubu-led administration, government policies have brought pain, anguish and sorrow to Nigerians. It lamented that account holders in Nigeria are already dealing with multiple taxation from both the Federal Government and the banks. The TUC berated the National Assembly for “colluding” with “elements in the executive” to “exploit” the citizens they ought to be protecting. Saying that all Nigerians are interested in right now is the urgent conclusion of discussions around the minimum wage and not a “vexatious policy”, the TUC urged the Federal Government to immediately direct the CBN to withdraw the circular to banks and cancel the levy forthwith. It said that it will be left with no option but to mobilize all its members, stakeholders and indeed the entire masses “to embark on the immediate protest that would culminate into the total shutdown of the Nigerian economy as this is one exploitation too many.”
More Burden on Nigerians as the Central Bank Slams Another Tax on Bank Customers
It will seem like there may be no respite soon for the toiling mass of Nigerians as they continue to be bombarded by all manners of taxes, tariffs and levies by the government and service providers with the latest being the introduction of a 0.5 per cent “cybersecurity levy” by the Central Bank of Nigeria (CBN). Earlier in the day, First Bank Nigeria Plc led others in the reintroduction of two percent processing charge on deposits above N500,000 and three per cent charge on amounts above N3,000,000 for corporate customers. The reintroduction of these charges is coming about four months after the Central Bank of Nigeria suspended such charges for cash deposits above N500,000. In a circular signed by Chibuzor Efobi, Director of Payments System Management and Haruna Mustafa, Director of Financial Policy and Regulation, the CBN said collection of the new levy shall commence in two weeks from yesterday, May 6th, 2024 and it shall be remitted to the Office of the National Security Adviser (ONSA). Even though the apex bank was silent on the use into which the ONSA will put the proceeds of the new tax to be paid by bank customers, it explained that deduction and collection of the cybersecurity levy is consequent upon the enactment of the Cybercrime (Prohibition, Prevention etc) Amendment Act of 2024. It was explained in the circular that Section 44 (2)(a) of the Act, provides for the collection of “a levy of 0.5% (0.005) equivalent to a half percent of all electronic transactions value by the business specified in the second schedule of the Act, is to be remitted to the National Cybersecurity Fund (NCF), which shall be administered by the Office of the National Security Adviser (ONSA).” It was further stated that the CBN shall rely on commercial, merchant, non-interest and payment service banks, as well as mobile money operators for the collection of the levy. It also stated that any defaulting institution that fails to remit funds collected shall be liable to a fine of not less than two percent of the annual turnover of the defaulting business. “Deductions shall commence within two (2) weeks from the date of this circular for all financial institutions and the monthly remittance of the levies collected in bulk to the NCF account domiciled at the CBN by the 5th business day of every subsequent month,” the bank stated.
FIRS Issues Apology to CAN and Christians Over Controversial Easter Message
The Federal Inland Revenue Service (FIRS) has extended an apology to Christians, particularly the Christian Association of Nigeria (CAN), following the dissemination of a controversial Easter message that sparked widespread condemnation. The contentious message, depicted in a flier featuring a Point of Sale (PoS) machine with the caption, “Jesus paid your debt, not your taxes,” elicited significant backlash from members of the Christian community. In response to the outcry, the FIRS issued a statement late on Tuesday, expressing regret for the misinterpretation of its message. The agency emphasized that the dissemination of the flier was not intended to denigrate Jesus Christ or undermine his significant sacrifice for humanity. “The unintended meaning/insinuation being read into the post was not what we were out to communicate as an agency,” the statement clarified. Furthermore, the FIRS reiterated its commitment to impartiality and respect for all religious beliefs, affirming that its primary objective is the assessment, collection, and proper accounting of revenue for the nation’s welfare. “We believe it is an investment in the progress of the country when citizens pay their taxes,” the agency stated. The FIRS concluded its apology by expressing remorse to CAN and all Christians who were offended by the unintended implications of its Easter message. This conciliatory gesture from the FIRS aims to address the concerns raised by the Christian community and foster harmony and understanding between the agency and religious groups in the country.
We Won’t Increase Taxes, FIRS Assures Companies
Acting chairman of the Federal Inland Revenue Service (FIRS), Zacch Adedeji, has allayed fears being expressed by corporate organisations that the resolve of FIRS to increase the country’s tax-to-GDP ratio to 18 per cent from 10.86 will lead to a hike in taxes. According to a statement by Special Adviser on Media and Communication to the Ag Executive Chairman, FIRS, Dare Adekanmbi, Adedeji said such resolve would not necessarily lead to increase in taxes or introduction of new taxes as the President Bola Tinubu-led administration is determined to create a wholesome environment for businesses to flourish. The FIRS chairman had said the agency under his leadership would in the next three years achieve an eight per cent raise in tax-to-GDP ratio to surpass Africa’s average of 16.5% without stifling investment or economic growth. The plan had triggered muffled apprehensions among entities corporate that the decision could cause an increase in tax rates or introduction of new ones. Addressing representatives of top large tax-paying companies during a get-together at Four Points by Sheraton in Lagos on Wednesday, Adedeji said, “Our belief, understanding and vision as a revenue-generating agency is not to introduce any new tax as we only want to use data to improve compliance.” A statement by his Special Adviser on Media and Communication, Dare Adekanmbi, quoted the FIRS chairman as saying that the invited companies and those willing to voluntarily carry out their tax obligations have nothing to be afraid of. “Our plan is simple. We want to grow tax revenue and we only want to tax prosperity and not poverty. Therefore, it is not in our interest to kill the trees that bear the fruits. My first ‘love letter’ to you is to appreciate what you have done. So, you don’t have anything to be afraid of. “We will not collect what is not due to us. But we don’t want anyone not to pay what is due to us. Fair engagement is our plan. Rest assured that the 18% tax-to-GDP target will not translate to increase in taxes. “If you have been listening to Mr Taiwo Oyedele who is the chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, you will have known that part of the mandate of the committee is to reduce the number of taxes,” he said. According to him, the purpose of the engagement with the companies is to factor their inputs into the strategic action plan being mapped out in order to address challenges hampering tax revenue collection. He lauded the invited companies for their high sense of responsibility, urging them to continue to discharge their tax obligation diligently. “I must also commend your commitment to upholding high tax compliance standards and responsible corporate citizenship, which sets you apart as the top taxpayers in Nigeria. “This aligns perfectly with our vision of making taxation the pivot of national development through voluntary compliance. Your respective industries play a pivotal role in generating substantial tax revenue for government and in shaping economic and fiscal stability of the nation. “We are not unmindful of the challenges facing businesses in Nigeria with the ongoing reforms to improve economic performance. These are painful but necessary choices we must make as a nation to attain our full potential,” he said. The chairman, while responding to some of the concerns raised by representatives of the companies such as multiplicity of taxes, duplication of tax oversight on corporate entities, promised to address the issues raised. Some of the companies at the event included Nestlé Nigeria Plc, ExxonMobil, Shell, Guinness, Nigerian Breweries Plc, Flour Mills, Dangote Group, MTN, British American Tobacco company, First Bank, Access Bank, Guaranty Trust Bank, Zenith Bank Plc, KC Gaming Limited (Bet9ja), Airtel, Seplat, BUA Cement, Nigeria Liquified Natural Gas, NNPC Limited and others.