Crypto tax: Coalition warns FG of $92bn market risk

Nigeria's Digital Assets Coalition has called on the Federal Government to reconsider its recently implemented Guidelines on the Taxation of Virtual Assets. The alliance of digital asset operators and stakeholders warns that the new framework could jeopardize Nigeria's estimated $92 billion digital assets market and undermine its leading position in Sub-Saharan Africa's cryptocurrency economy.

The coalition, presenting its position paper titled “Tax the Profit, Not the Movement of Money,” supports the taxation of virtual assets but objects to the current approach. They argue that the guidelines focus on taxing financial transactions rather than actual profits. This, they contend, could discourage innovation, push transactions to overseas platforms, and ultimately decrease government revenue. Obinna Iwuno, the coalition's spokesperson, emphasized that the industry is not against taxation but desires a system that is fair, practical, and aligns with international standards.

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We support the taxation of virtual assets without qualification. Our concern is with a design choice that taxes the movement of money itself. This charge falls on a remittance to a student abroad, on a freelancer converting earnings already taxed as income, and on a trader in a year they lost money. That is not a tax on profit. It is a toll on participation.

Iwuno highlighted concerns with specific aspects of the framework, including a 1.5 percent stamp duty on all conversions between the naira and digital assets, irrespective of profitability. Additionally, a one percent withholding tax is levied on the total value of every digital asset sale, even if investors incur losses. The requirement to remit taxes in digital tokens instead of naira was also cited as problematic. The coalition supports regulatory measures like platform registration and transaction reporting but insists that taxation should exclusively target realized gains.

The coalition further warned that the new rules could negatively impact young Nigerians, who form a substantial part of the digital asset user base. Iwuno stated, "The framework is anti-youth in effect, even if not in intent. You cannot tax your way into the future by taxing the people building it." They cautioned that the guidelines might compel users to shift to foreign platforms, making them inaccessible to Nigerian regulators, thereby reducing compliance and tax collection. The coalition pointed to India's experience, where a one percent transaction withholding tax reportedly contributed to a decline in the sector.

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The framework is anti-youth in effect, even if not in intent. You cannot tax your way into the future by taxing the people building it.