In its intervention in Nigeria’s fiscal discourse, KPMG, a globally recognized firm offering audit, tax, and advisory services, has voiced significant concerns regarding the federal government’s proposed 0.5 percent cybersecurity levy.
The firm’s critique, articulated through a detailed analysis, sheds light on the timing and potential implications of the levy within the current economic context. It noted that while several reports suggested that the government could generate approximately N3 trillion annually from the levy, there has been no formal disclosure to the public regarding the cost and benefit analysis.
KPMG wasted no time in addressing the elephant in the room—the timing of the cybersecurity levy. In no uncertain terms, the firm labeled the levy as “ill-timed under the current economic realities.” It pointed out that while the idea itself wasn’t novel, implementing it amidst ongoing economic reforms risks compounding the financial strain already felt by businesses and individuals alike.
Tekedia Mini-MBA edition 16 (Feb 10 – May 3, 2025) opens registrations; register today for early bird discounts.
Tekedia AI in Business Masterclass opens registrations here.
Join Tekedia Capital Syndicate and invest in Africa’s finest startups here.
The firm said: “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 firm’s reservations didn’t stop at timing. It delved deeper into the rationale behind the levy. Drawing on economic theory, KPMG emphasized that taxing the populace excessively does not lead to sustainable growth—a cautionary tale for policymakers navigating Nigeria’s turbulent economic situation.
By echoing sentiments often expressed by economists and fiscal experts worldwide: “No country can tax itself to prosperity,” KPMG warned against the allure of higher taxes as a panacea for economic woes, stressing the need for a more nuanced approach to revenue generation and economic management.
KPMG stated, “Undoubtedly, Nigeria faces significant revenue challenges. This has, therefore, constrained, and continues to constrain, the country’s capacity for achieving sustainable growth. Given this context, the government may go to any length to mobilize 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 emphasized that the government will not introduce new taxes.”
In dissecting the scope of the levy, KPMG revealed its far-reaching implications beyond financial institutions. From GSM service providers to telecommunication companies, internet service providers, insurance firms, and even the Nigerian Stock Exchange, no sector would be spared from its impact. This expansive reach underscores the levy’s potential to disrupt various facets of the economy.
However, KPMG’s critique wasn’t merely academic—it was pragmatic. It called attention to the lack of transparency surrounding the levy’s implementation, particularly concerning its cost and benefit analysis. With no formal presentation to the public, the firm urged for greater clarity and accountability in tax-related matters to foster trust and confidence among stakeholders.
“It is not sufficient to provide only the revenue projection, which is not certain as no details have been provided with respect to this; albeit there have been reports on how the money would be spent,” it said.
“Under the enabling Act, the Office of the National Security Adviser will be responsible for administering the fund. Though the Act provides that the fund shall be audited in accordance with guidelines issued by the Auditor General of the Federation, this does not provide enough comfort.
“There are many government agencies that have not been audited for years and nothing has happened. It is, therefore, critical that practical measures be put in place to ensure transparency and accountability.”
Moreover, KPMG raised pertinent questions about the levy’s unintended consequences and potential loopholes. It pondered whether the levy could inadvertently lead to a resurgence of cheque transactions, given their exclusion as electronic transfers under the enabling Act—a loophole that could undermine the levy’s efficacy.
In a nod to responsible governance, KPMG urged the government to prioritize tax reforms that address revenue leakages and exercise prudence in public expenditure. It emphasized the importance of striking a balance between revenue-raising initiatives and responsible spending practices to ensure fiscal sustainability—a message that resonates amid Nigeria’s economic challenges.
Following heavy backlash from Nigerians and multinationals like KPMG, the federal government has asked the central bank to halt the implementation of the cybersecurity levy.