Cyber Charge,Taxation and Minimum Wage
In the last couple of weeks, two issues have dominated discussion about Tinubu’s economy: the imposition of a cyber security charge on Nigerian bank customers by the Central Bank of Nigeria (CBN) and the demand by organized labour through the Nigeran Labour Congress (NLC) and the Trade Union Congress (TUC) for a minimum wage increase from N30,000 to N615,000. These issues are woven around the idea of taxation. A cardinal pillar of Tinubu’s economics, whatever that means, is the need to increase tax revenue. The current fiscal crisis arising from dwindling revenue, rising costs of debts and drastic devaluation of the naira mean that the government will be looking out for where to collect more money from the people. When you are a government that sees taxation as a prime fiscal policy, this disposition may become an obsession.
Of course, improving taxation is important for Nigeria’s economy and politics. It is argued that if our public expenditure is funded by taxes more than natural resources revenue, we could develop a real culture of democratic accountability as who pays the piper calls the tune. Taxation has the consequence of raising civil activism in defence of good governance. We see evidence of this in the recent outcry over the cyber security charge. So here we are debating whether bank customers should be charged 0.5% of almost every transaction they make based on a directive from the CBN to all commercial banks. According to the CBN directives, the charge is authorised by the Cyber Security (Prohibition and Prevention (amendment)) Act 2024 which instructs the banks to collect the charge from customers and pay into a
National Cyber Security Fund under the management of the National Security Adviser to the President.
The directive has triggered outcry by many Nigerians and threat of industrial action by the leadership of organized labour. Amid the furore, the House of Representatives advised the Central Bank to rescind the order. Interestingly, the House through a motion by its minority leaders, Hon. Kingsley Chinda, noted that the directive that the banks charge 0.5% of customers’ transfers contravenes Section 44(2) of the law that prescribes that only specified businesses should pay the charge, namely financial institutions, telecommunication companies, and internet service providers. By expanding the ‘tax’ to transactions by ordinary customers, the Central Bank has exceeded the powers denoted to it by the National Assembly in the Act. In lawyers’ language, the directive is ultra vires the powers of the Central Bank. After this legislative order, President Tinubu responds by directing the CBN to suspend execution of its directive.
In spite of the presidential directive to suspend the charge, we need to contextualize the directives from the Central Bank to understand what is wrong with public policy administration in Nigeria. Why did the CBN include ordinary financial transactions in the charge? Why did the federal legislature consider the imposition of a tax in the guise of a bank charge a proper response to the challenge of building a strong institutional protection against cyber attacks? Furthermore, what makes the Office of the National Security Adviser (ONSA) the best manager of a fund to develop infrastructure against cyber attacks?
The inclusion of ordinary customer transactions in the charge must be an intentional act to expand the fund. Based on annual financial transactions, inclusion of ordinary customer transactions will boost the fund with trillions of naira. This will be a classic case of easy tax collection with little administrative costs. Tax avoidance will be minimal as almost every transaction will be captured. So, in the context of obsession with fiscal buoyancy by present officials, deliberate avoidance of law in the quest for more tax revenue will not be a conspiracy theory. There must be something
intentional about it. The other possible explanation could be that those who promoted the amendment thought they had reflected their intention to include every financial transaction but did not realize that the actual texts of the law remained. So, the intent was to include all financial transactions. But bad legal drafting defeated that intention. A charitable explanation is that the actual intent was to exclude ordinary financial transactions. But the CBN blundered in crafting its implementation order.
Notwithstanding whether there is a drafting error or not, the first point to note is that what government imposes by the charge is a tax, and not a bank charge. The nature of a bank charge is that it is tied to a service provided by the bank. There are numerous such charges. We may argue that they are excessive. But each of them is well-defined as a fee paid for a stated service provided by the bank. It is the bank that provides the service that takes the benefits. But the cyber security charge is not a charge in respect of services rendered by the bank. It is a tax to raise revenue for the government to build technological resilience against cyber attacks. The Act states that the fund will be managed by the ONSA subject to audit. It is hard to understand the policy thinking that gives the ONSA, an advisory office, the statutory responsibility for project management for an expansive subject matter like cyber security. From the Act, part of the fund will be used to train cyber security professionals. How is the NSA the best person to manage such human capital development?
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