Nigeria’s fintech sector is bracing for the Electronic Money Transfer Levy (EMTL), a move that has drawn widespread attention for its timing and broader implications. Fintech companies, including OPay, Moniepoint, and others, have notified their customers of the N50 EMTL deduction on inflows of N10,000 and above starting from September 9, as directed by the Federal Inland Revenue Service (FIRS).

This marks the end of an era where several fintech platforms provided free banking services, as the charges will now go directly to the federal government.

The Background of the Levy

The EMTL was introduced as part of the Finance Act 2020, designed to raise revenue from electronic transactions. At its core, the levy is an N50 charge applied to any electronic transfer of funds amounting to N10,000 or more. The idea behind the levy was to tap into the burgeoning digital payments ecosystem to generate revenue that could help fund government projects and services.

The government initially announced the regulatory guidelines, signed by then Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, in 2022. The FIRS was appointed to administer the levy. However, the timing was particularly sensitive, as Nigerians were already grappling with economic challenges that included high inflation.

Irony of The Extension to Fintechs

The extension of the EMTL to fintechs, at a time when the government claims it is working to reduce the tax burden on Nigerians has raised eyebrows. President Bola Tinubu’s administration, which recently inaugurated a tax reform committee to reduce multiple taxation, had promised relief for struggling Nigerians. Many believe that the imposition of the levy on fintechs contradicts those promises.

Moreover, this move is coming in the face of the Central Bank of Nigeria’s (CBN) push for a cashless economy. The CBN has spent years promoting digital payments, urging Nigerians to transition from cash to electronic platforms to enhance efficiency and reduce the cost of handling cash. Many fintech platforms, including Moniepoint and OPay, have been key players in advancing this cashless agenda by offering free transactions, thereby encouraging the adoption of electronic payments across the country.

Now, with the mandatory N50 charge on electronic transfers, critics argue that the EMTL could slow down this progress. The additional cost of making transactions might discourage people from using digital platforms, especially those who transact frequently. For lower-income individuals or small businesses that depend on several smaller transactions daily, the levy adds up, creating yet another layer of financial strain.

A Blow to Fintechs

The levy also poses a challenge to fintech companies that have built their businesses on providing seamless, low-cost, or free digital payment services. OPay, Moniepoint, and other platforms had long attracted users by eliminating or minimizing transaction fees, which set them apart from traditional banks. This business model helped fintechs capture a significant portion of Nigeria’s payments market, particularly among the underbanked and unbanked population.

With the EMTL coming into effect, fintechs will be forced to pass the cost onto their customers, which might weaken their competitive advantage. While the deduction goes to the federal government, customers are likely to associate these new charges with the fintech companies themselves. In addition, fintechs may see a decline in transaction volumes as users seek ways to avoid the added costs, either by reducing the number of transactions or reverting to cash.

Contradictions in Economic Policy

The extension of the EMTL to fintechs also reveals contradictions in Nigeria’s broader economic strategy. On the one hand, the government is looking to expand its revenue base through taxes like the EMTL. On the other hand, it claims to be committed to alleviating the tax burden on its citizens and promoting digital financial inclusion.

Experts warn that policies like the EMTL could backfire if they push more people out of the formal financial system. They say that the government risks undoing years of progress toward financial inclusion, as this levy could drive people back into cash-based transactions, undermining the CBN’s cashless policy.

In the ever-evolving landscape of blockchain technology, Layer 1 (L1) blockchains stand as the foundational infrastructure upon which the burgeoning ecosystem of decentralized applications (dApps) is built. These primary blockchains are not just the first point of contact for transactions and smart contracts but also the bedrock that ensures the security, decentralization, and scalability of the network.

At the core of their value proposition, L1 blockchains offer a decentralized framework that is resistant to censorship and outside control, fostering an environment where innovations in finance, governance, and beyond can flourish without the need for traditional intermediaries. This has led to a surge in the development of dApps that leverage the inherent benefits of these blockchains, ranging from decentralized finance (DeFi) platforms to non-fungible token (NFT) marketplaces.

The security of L1 blockchains is paramount, as they are responsible for validating and recording transactions on a public ledger. The robust consensus mechanisms employed by these blockchains, such as Proof of Work (PoW) and Proof of Stake (PoS), not only secure the network but also ensure that the integrity of the data is maintained.

Decentralization is another key aspect that adds to the value of L1 blockchains. By distributing the power and control across a wide network of nodes, these blockchains eliminate single points of failure and reduce the risk of manipulation or attack. This decentralized nature also contributes to the trustless environment that is central to blockchain’s appeal.

Scalability remains one of the most significant challenges facing L1 blockchains. As the number of users and transactions grows, the need for blockchains that can handle increased throughput without compromising on decentralization or security becomes more pressing. Innovations in layer 1 solutions, such as sharding and new consensus algorithms, are being developed to address these concerns and enhance the blockchain’s ability to scale effectively.

The economic value of L1 blockchains is reflected in their market capitalization and the total value locked (TVL) within their ecosystems. As of late 2023, the market cap for L1 coins stands at a staggering $1.72 trillion, with a significant portion of this value concentrated in leading blockchains like Ethereum, which alone commands a TVL of $23.0 billion. This economic indicator not only underscores the financial significance of L1 blockchains but also highlights the confidence and investment that users and developers place in these platforms.

Furthermore, the role of L1 blockchains in the broader context of the crypto ecosystem cannot be overstated. They serve as the primary and autonomous chains on which transactions are directly executed and confirmed, providing the essential infrastructure for the blockchain network. Just as iOS or Android underpins mobile apps, L1 blockchains underpin the entire suite of applications and products built on top of them, significantly influencing their features and benefits.

The value of L1 blockchains lies in their ability to provide a secure, decentralized, and scalable platform for the development of a new digital economy. As the technology continues to mature and evolve, the importance of L1 blockchains in supporting innovation and fostering economic growth will undoubtedly remain a cornerstone of the blockchain revolution.

Uber has secured a significant legal victory in Australia, where a New South Wales (NSW) court ruled that the rideshare giant is not liable for millions of dollars in payroll taxes.

The ruling, handed down by NSW Supreme Court Justice David Hammerschlag, concluded that Uber does not directly pay its drivers for their services; instead, passengers themselves are responsible for compensating drivers. This decision effectively wipes out over $81.5 million in payroll tax assessments levied on the company from 2015 to 2020.

The case hinged on the nature of the relationship between Uber, its drivers, and the passengers. Uber has consistently maintained that its platform merely connects riders with drivers, acting as a payment collection agent.

The court’s decision upholds this view, determining that Uber does not pay drivers a wage for their labor.

In his ruling, NSW Supreme Court Justice David Hammerschlag sided with Uber, stating that the company did not pay the drivers but acted as a “payment collection agent.” This meant that Uber simply facilitated the transfer of payments made by riders to drivers but was not responsible for paying drivers a wage.

“It is not Uber who pays the driver,” Justice Hammerschlag said in his decision. “The rider does that. What Uber pays the driver is in relation to the payment Uber has received, not in relation to the work itself.”

The ruling dismissed the state’s payroll tax assessments against Uber and rejected the state officials’ claims that the company owed millions in back taxes, as well as interest.

Uber’s defense revolved around the idea that its platform functions as a marketplace, where drivers and riders contract directly with each other. Uber maintained that the terms of service agreed to by riders when signing up for the app form the basis of this contract, and as a result, drivers are not employees or wage earners under traditional definitions.

This distinction was key to avoiding payroll tax obligations, which are typically levied on businesses that employ workers.

Lawyers for the NSW Chief Commissioner of State Revenue argued that while drivers undoubtedly provided transport services to riders, they also offered a service to Uber, given that the rideshare giant benefits from the transactions facilitated on its platform. This argument was rejected by the court, with Justice Hammerschlag concluding that Uber’s role was limited to processing payments and maintaining the marketplace infrastructure.

This ruling stands in sharp contrast to similar legal battles Uber has fought—and lost—across the globe, particularly in the US, UK, and parts of Europe, where courts have ruled in favor of recognizing Uber drivers as employees rather than independent contractors.

In landmark cases, especially in the UK Supreme Court, drivers were classified as workers entitled to various benefits, including a minimum wage, vacation pay, and health plans. Those rulings have placed significant pressure on Uber to overhaul its business model and offer employee protections for drivers. This shift has affected not just its operations but also its financial outlook.

In the US, particularly in California, Uber has been embroiled in a protracted battle over its drivers’ status, which culminated in the passage of Proposition 22. The legislation allowed Uber and other gig economy companies to continue treating drivers as independent contractors, though it required offering some benefits, such as healthcare subsidies.

In Europe, Uber has faced even stricter scrutiny, with courts ruling that the company has significant control over its drivers, setting conditions that mirror those of an employment relationship. These rulings have forced Uber to recalibrate its strategy in several European countries, either offering benefits or facing steep fines for failing to comply with labor regulations.

The Australian ruling provides a measure of relief for Uber, but it also sets a legal precedent that could have wider implications for other peer-to-peer platforms. By recognizing Uber as a marketplace rather than an employer, the court may pave the way for other gig economy companies to sidestep the costly obligations that come with employee classification.

Companies like Airbnb, TaskRabbit, or DoorDash, which facilitate transactions between service providers and customers, may seek to use this decision to challenge payroll taxes and other regulatory obligations that rely on the notion of employer-employee relationships.

Justice Hammerschlag did acknowledge, however, that the laws applied in this case were devised long before services like Uber existed, suggesting that the legal framework might need updating to adequately address the complexities of modern gig work.

However, while Uber successfully avoided the payroll tax obligations in this case, the NSW state government could still choose to challenge the ruling in a higher court. Additionally, as the ruling pertains specifically to the 2015 to 2020 period, future tax laws could be adapted to better address the unique nature of peer-to-peer and gig economy platforms.