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Nigerias New Tax Rules on Crypto May Not Bring In Expected Revenue

Nigerias New Tax Rules on Crypto May Not Bring In Expected Revenue
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  • Nigeria is introducing new taxes on cryptocurrency transactions, including a 0.51% capital gains tax and 10% VAT on exchanges, with the aim of generating up to 200 billion naira ($250 million) annually.
  • Critics argue that the high taxes may drive users toward unregulated peer-to-peer (P2P) platforms, making compliance and revenue collection difficult.

Due to Economic struggles, Nigeria plans to tax cryptocurrency transactions to gain revenue from the growing digital market. The Securities and Exchange Commission (SEC) is updating rules to support this new tax system.

In February, news spread that Nigeria plans to change its digital asset rules to tax cryptocurrency trades, in hopes that it would boost the countrys revenue. Tge bill in the National Assembly seeks to create a legal structure for taxing activities on approved exchanges and may be passed soon. 

The Securities and Exchange Commission (SEC) is also expanding licensing to track compliance. In August 2024, the SEC granted its first exchange license and has since moved to regulate unauthorized platforms.

Earlier in the year, The Nigerian took legal action against Binance for unpaid taxes and introduced new cryptocurrency levies to help its struggling economy, though the impact remains uncertain. The government filed an $81.5 billion lawsuit against the worlds largest exchange by trading volume, seeking $2 billion in back taxes and $79 billion in damages for allegedly devaluing the local currency. 

Nigeria, ranked as the worlds 53rd largest economy , is expected to see a higher GDP growth from 2010 to 2050, according to Citigroup. However, recent economic struggles have led the government to introduce major tax changes, a new minimum wage system, and other measures.

Officials believe that tracking down unregulated crypto platforms like Binance could help generate over $81 billion, along with other tax on crypto transactions. In all of this, Nic Puckrin, founder of The Coin Bureau, argues that collecting these taxes will be difficult due to Nigerias large retail over-the-counter (OTC) market and the use of crypto by importers to navigate currency fluctuations.

Balancing Crypto Taxation and Compliance in Nigeria

In Nigeria, Over 45% of adults lack bank accounts and almost 35% of these adults use digital assets for payment/transaction related activities and savings due to this, the government believes that taxing cryptocurrency aims to bring the informal economy into the system.

The Government proposed 0.5 1% capital gains levy on profits and 10% VAT on exchanges with this they could raise up to 200 billion naira ($250 million) yearly. However, excessive charges may drive users to unregulated peer-to-peer (P2P) platforms, making enforcement difficult. 

While the policy seeks to regulate digital finance and ease fiscal pressures, the success of this highly  depends on balancing oversight with innovation. Overburdening traders could slow adoption, but well-planned rules might increase revenue and promote financial inclusion. Nigeria could enhance enforcement using blockchain analytics, as seen in Indias partnership with Chainalysis. 

Related Reading | Ethereum Faces Market Turmoil, Can Bulls Defend the $2,000 Level?

Read more: https://www.tronweekly.com/nigerias-new-tax-rules-on-crypto-may-not-bring-in-expected-revenue/

Text source: TronWeekly

Disclaimer: Financial information and news are not financial advice, read the disclaimer.
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