KPMG, a global firm offering audit, tax, and advisory services, has raised concerns regarding the Nigerian government’s implementation of a 0.5 percent cybersecurity levy, stating that it is “ill-timed” given the current economic climate.
The firm emphasized that while the idea is not new, it is unjustified amidst the prevailing economic challenges.
Recall that Parallel Facts reported that Chief Bola Tinubu has told the Central Bank of Nigeria to suspend the implementation of the policy and ordered a review.
However, KPMG Highlighted the squeezing effect of ongoing reforms, stressed that higher taxes do not lead to sustainable growth and warned against the unintended consequences of such policies.
The levy, applicable not only to financial institutions but also to GSM service providers, telecommunication companies, internet service providers, insurance companies, and the Nigerian Stock Exchange, is set to impact various sectors of the economy.
While acknowledging Nigeria’s significant revenue challenges, KPMG underscored that higher taxes do not guarantee prosperity.
The firm questioned the timing of the levy’s implementation, urging regulators to consider the country’s economic conditions before issuing guidelines for its enforcement.
KPMG further stated, “Undoubtedly, Nigeria faces significant revenue challenge. This has, therefore, constrained, and continues to constrain, the country’s capacity for achieving sustainable growth. Given this context, government may go to any length to mobilise 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 emphasised that the government will not introduce new taxes.
“Though the cybercrime levy is not new as it has been in existence since 2015, the question is why implement it now given the prevailing economic challenges? The timing of any reforms is essential to the success of such reforms. This underscores the current public resistance to the implementation of the levy.
“This is certainly not the right time to implement this levy. Hopefully, the National Insurance Commission (NAICOM) and the Nigerian Communications Commission (NCC) will consider this before introducing their own guidelines with respect to those businesses under their purview.”
The primary objective of the cybersecurity levy, according to KPMG, is to ensure dedicated and adequate funding to address the growing threats of cyber-attacks.
However, the firm emphasized the importance of considering prevailing economic conditions before implementing such measures.
Despite reports projecting an annual revenue of about N3 trillion from the levy, KPMG highlighted the absence of a formal presentation of cost and benefit analysis to the public. The firm emphasized the necessity for transparency and accountability in administering the funds generated from the levy.
One key concern raised by KPMG is whether the implementation of the levy would lead businesses to resort to alternative measures to avoid payment. The firm urged the government to reconsider delaying the implementation and instead focus on tax reforms addressing revenue leakages while ensuring prudent financial management.
KPMG emphasized the importance of combining revenue-raising initiatives with responsible spending practices for fiscal sustainability. It urged the government to consider phasing in tax reforms gradually to minimize potential shocks to the economy.
