Limits on Cash Withdrawals from the CBN Widen Tax Revenue Window

The window for tax income has been expanded by the Central Bank of Nigeria's (CBN) new policy on over-the-counter cash withdrawal limitations as well as withdrawal limits for Automated Teller Machines (ATM) and Point of Sale (POS) terminals.

Deposit money banks (DMBs) and other financial institutions must make sure that over-the-counter cash withdrawals by individuals and corporate entities do not exceed N100,000 and N500,000, respectively, every week, according to a new regulation that the CBN published on December 6, 2022.

Individuals will only be able to withdraw N100,000 per week (from ATMs, Point of Sale machines, or over the counter), according to a memo to banks signed by the Director of Banking Supervision, Haruna.B. Mustafa. Organizations will be able to access N500,000 per week.

Additionally, banks have been told to only load N200 and lesser denominations into their ATMs.

The CBN stated that the new instruction would support a cashless society and that clients should be urged to perform their financial transactions through alternative channels, such as eNaira, mobile banking, internet banking, and USSD.

Many people are unaware that the increased use of electronic banking facilities has tax repercussions, despite public anxiety over the transactional hassles the new policy will cause.

These include income tax ramifications for corporate account holders in small, medium, and large enterprises as well as multiple channels like data, sms, call credits, and other electronic media platforms associated with financial transactions. They also include the statutory 7.5 percent Value Added Tax (VAT), the N50 Electronic Money Transfer Levy, and other taxes and fees.

The Federal Inland Revenue Service (FIRS) has recently increased non-oil revenue as a result of its aggressive tax enforcement tactics in response to the government's ongoing revenue challenge, which has been made worse by the Nigerian National Petroleum Company (NNPC) Limited's non-remittance of oil revenue to the Federation Accounts Allocation Committee (FAAC) since January 2022.

In comparison to the overall collection of N6.4 trillion for the full of 2021, the FIRS has collected N7.5 trillion between January and September 2022. Petroleum profits tax made up N3.1 trillion of the N3.1 trillion in non-oil taxes. Given that FIRS has significantly funded FAAC during the past three years, particularly in 2022 when oil money "dried up," it is obvious that the changes implemented since 2020 have begun producing the anticipated outcomes.

The amount split by the three tiers of government from FAAC has increased dramatically over the past year, from N574.66 billion in January to N736.78 billion in October 2022, despite the fact that savage inflation has reduced the value of the naira.

The Oil and Gas Royalties, Statutory Revenues, Exchange Gain, Petroleum Profit Tax, Import Duty, VAT, Company Income Tax, Excise Duty, and Augmentations from Non-Oil Revenue all saw significant revenue growth in July 2022, when FAAC recorded the highest receipt of N954.08 billion. Findings revealed that the Electronic Money Transfer Levy enacted in the 2022 Finance Act had generated a total of N195.43 billion as of November.

Increases in operating costs, cost of sales, administrative costs, raw material costs, warehousing costs, and finance costs are bad news for manufacturers and service providers. By raising the pricing of their goods and services, they have passed on the increased costs to the customers. Low consumer demand as a result of this has implied a low level of living. According to a recent report by the National Bureau of Statistics (NBS), 211 million people, or 63% of the population, are multidimensionally poor.

"Many Nigerians are unaware that they pay taxes on a daily basis. Nigerians are taxed, sometimes in many dimensions, on everything from phone conversations to social media interactions to shopping to the purchase of table or sachet water, according to tax expert Kenny Adiogun. Nigerians would face severe hardships in 2019 as a result of the country's near-bankruptcy and our government's frantic search for cash, which they claim was not a challenge but rather debt, Adiogun said over the phone.