Nigeria plans tax laws regulating crypto

Nigeria's Federal Inland Revenue Service is gearing up to present a bill to parliament in September aimed at taxing cryptocurrency transactions as part of an overhaul of revenue administration in the country. This move marks a significant milestone in the effort to regulate the burgeoning crypto industry in Nigeria. In a recent interview with CNBC Africa, Theo Emuwa, Partner at Aelex, shed light on the implications of this new tax law and the broader implications for Nigeria's tax structure. Emuwa emphasized the principle that any activity generating income should be subject to taxation, including crypto transactions. He drew a parallel to traditional trade by barter, highlighting the need to tax all forms of economic activity. Emuwa noted that while taxing crypto had posed challenges in the past, the government's decision to introduce a tax bill signifies a shift towards integrating crypto into the tax framework. One key aspect of the proposed tax law is the introduction of a 7.5% value-added tax (VAT) on crypto transactions. Emuwa cautioned that clarity is essential in defining which aspects of the transactions would be subject to VAT. He pointed out that service charges related to crypto transfers should be taxable, rather than the principal amount moved. Emuwa stressed the importance of distinguishing between taxable profits and transactional amounts to avoid confusion and ensure effective implementation of the tax law. Theo Emuwa also discussed the broader implications of the new tax law, which is part of a comprehensive effort to enhance domestic revenue mobilization in Nigeria. He highlighted the role of technology in facilitating tax collection and enforcement, citing advancements that enable authorities to track financial transactions more efficiently. Emuwa underscored the importance of data-driven approaches to taxation, noting that improved data collection mechanisms enhance compliance and enable the effective implementation of tax laws. In addition to regulating crypto transactions, Nigeria is exploring other avenues to broaden its tax base. Emuwa mentioned Lagos State's initiative to tax remote workers as an example of expanding the tax bracket. By leveraging technology and improving data collection, the government aims to enhance its tax-to-GDP ratio over the long term. Emuwa acknowledged that achieving significant gains in the tax-to-GDP ratio would take time but emphasized the need for coordinated efforts across states to prevent tax evasion. While the Federal Inland Revenue Service has met or exceeded its annual revenue targets, Emuwa noted that the current tax-to-GDP ratio in Nigeria remains below the African average. He highlighted the importance of setting ambitious targets to drive revenue growth and enhance fiscal sustainability. Emuwa emphasized the need for continuous progress in tax compliance and revenue mobilization to align with international standards. As Nigeria prepares to introduce new tax laws regulating cryptocurrency transactions, the focus shifts to effective implementation, transparency, and compliance. The upcoming tax bill signals a proactive approach by the government to adapt to evolving financial landscapes and enhance revenue administration in the digital age. With the right mechanisms in place, Nigeria can position itself for sustained revenue growth and fiscal stability.