In a surprising turn of events, Nigerian authorities have made a move to implement a 10% tax on gains from digital assets, including cryptocurrencies. According to Obinna Iwunna, the president of the Stakeholders in Blockchain Technology Association of Nigeria (SIBAN), this step seems premature as there are still many unresolved issues surrounding cryptocurrencies in the country.
This tax is part of the provisions in the the Finance Act, 2023, which also provides other set of tax reforms that aim to modernize the Nigerian fiscal framework. While the intent might be admirable, the execution is likely to be fraught with roadblocks. Iwunna draws attention to the problems inherent in this decision, comparing it to putting the cart before the horse.
The key problem lies in the fact that the Central Bank of Nigeria (CBN) has governed commercial banks not to facilitate transactions involving cryptocurrencies. The paradoxical stance of taxing something that is not yet fully acknowledged or defined is clear proof of the complexities inherent in this issue.
Iwunna argues that much like the way the National Information Technology Development Agency (NITDA) interacted with Nigeria’s blockchain technology, a collective understanding of cryptocurrency is requisite before moving forward with taxes and regulations.
Specific agencies such as the Nigerian Securities Exchange Commission (SEC), the CBN and the NITDA each have roles to play in this oversight. Still, only when a uniform definition of cryptocurrency is instituted, will appropriate policies, regulations, and taxation measures follow.
In light of these concerns, stakeholders have reached out to SEC and CBN, yet no decisive actions have been taken. While the government aspires to broaden its tax base, there is also a need to ensure such taxation does not stifle the growth of the cryptocurrency sector.
The lack of consultation during the E-Naira launch is cited by Iwunna as a case in point. If there had been dialogue between the authorities and the digital asset ecosystem, the E-Naira could have quickly been embraced by millions of Nigerians.
The speed of cryptocurrency (then undefined and unrecognised) being taxed once again calls into question the readiness of regulatory institutions in grappling with this relatively new technology and the subsequent need for clarity and infrastructure. It’s a fascinating demonstration of how fast-paced the crypto world is and how traditional financial systems are challenged to keep up.
Source: Cointelegraph
