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Nigeria’s Crypto Tax Plan Faces Serious Challenges
In a bid to address its economic difficulties, Nigeria has introduced a cryptocurrency tax plan, aiming to raise $81 billion in revenue. The move follows the country’s legal action against Binance for unpaid taxes. However, the government’s plan faces significant challenges in enforcement.
Firstly, Nigeria’s crypto market is largely unregulated, with over 47 million people using or owning digital assets. While there are plans to strengthen oversight through SEC guidelines aligning with FATF recommendations, it remains uncertain whether this will effectively tackle tax evasion.
Moreover, the country has a long-standing issue with low tax compliance. According to the World Bank, Nigeria’s tax-to-GDP ratio is 6%, one of the lowest globally. The Federal Inland Revenue Service (FIRS) collected N10.1 trillion ($12.7 billion) in 2022, but only 12% of the workforce contributed to this revenue. A staggering 9% of taxable adults paid income tax that year.
The government hopes to tap into the informal sector, which accounts for 65% of GDP, by taxing cryptocurrency transactions. Many Nigerians use peer-to-peer (P2P) trading to avoid currency devaluation and inflation. With a thriving P2P ecosystem, traders may choose to evade taxes by switching to these platforms.
Another challenge lies in enforcing tax collection. Nic Puckrin, founder of The Coin Bureau, noted that the government lacks the resources to track down those who refuse to comply with the new regulations. He emphasized, “Nigeria has a thriving P2P ecosystem, so if users wanted to evade having to pay the fees on centralized exchanges, they would just take it off the platforms.”
As Nigeria’s crypto market continues to grow, it remains uncertain whether this plan will materialize into actual revenue. The government’s focus on digital assets as an alternative means of remittances and savings adds complexity to the issue.
While some citizens may use cryptocurrency for financial inclusion, many others are expected to bypass these taxation provisions altogether. With no clear solution in sight, the effectiveness of Nigeria’s crypto tax plan remains uncertain.
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