In a bid to address its revenue challenges, Nigeria has concluded plans to commence the taxation of digital transactions across the country, arguing that this will help in plugging loopholes in the revenue-generating ecosystem.
The Secretary to the Government of Federation (SGF), Mr Boss Mustapha gave hints on digital tax collection and remittances on Tuesday in Abuja at the 17th General Assembly of the West African Administrations Forum (WATAF) and 10th year anniversary of the organization themed: ‘The Taxation of the Digital Economy: Exploring Untapped Revenue Sources in Africa”.
Already, President Muhammadu Buhari and the Federal Executive Council (FEC) have approved the Federal Inland Revenue Service’s (FIRS) request to digitize tax collection and remittances in Nigeria; having seen the importance of its tax- pro max, an in-house technology that helped it rake in over N664 billion in June 2021, the highest revenue in a single month since the COVID-19.
Mustapha recalled that, over time, the importance of the internet has continued to grow, as it remains the backbone of e-commerce.
The SGF said many electronic platforms that started as social media sites have since transited into big businesses generating significant income; as it has since become commonplace for entities to consummate business relations remotely, without a physical presence in the countries where goods and services are exchanged.
“In other words, the traditional brick-and-mortar business is now very much up against an entirely different business model. Suffice to say that while this presents great economic and business opportunities, on the one hand, it also presents a challenge on the other as Governments must find their way around what is still very much an emerging area of tax administration”.
“Digital transactions must be taxed digitally and the goal of our efforts must be to achieve seamless digital collection and remittance of tax revenue that accrues from the digital economy. The President of the Federal Republic of Nigeria, President Muhammadu Buhari, has given impetus to this drive by directing the deployment of technology to good effect in revenue collection and remittance as a matter of Government policy”.
“In addition, the apex tax authority in Nigeria, the Federal Inland Revenue Service has received the unalloyed support and backing of Mr President and the Federal Executive Council, in its efforts towards digitalization of the tax collection channels in particular and tax administration process in general. This is supported by the amendment to the tax laws and empowering the tax authority to deploy technology in tax”, he explained.
He said the government was putting in place measures to ensure that it keeps up to date with these developments and answer the question of what to collect and how to collect it, as far as the digital economy is concerned.
“Therefore, our definition of what to collect- whether we call it income tax, Digital Service Tax or Value Added Tax, must address the issue of redefining who a taxable person or entity is, to accommodate the fact that digital transactions sidetrack the ordinary and traditional understanding of jurisdiction. In addressing this question, Nigeria is constantly reviewing its domestic laws to identify changes required to bring the digital economy to taxation in the country. The Finance Bill 2019, signed by President Muhammadu Buhari in January 2021, seeks to broaden the triggers for domestic taxation of income earned by non-resident companies in the country through dependent agents and via online platforms. Also, Nigeria is participating in the ongoing discussions with many tax-related bodies, such as the OECD, UN Tax Experts Committee, ATAF, ECOWAS, WATAF etc. to explore global solutions to the tax challenges of digitalization of the economy”, said the SGF..
Earlier in her remarks, Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed challenged member Africa countries to be conscious of the ultimate goal of the ATAF, which she said is an equitable reallocation of profits, to maximize revenue for member states.
“As the so-called “e-economy” continues to grow and develop internationally, it is only natural to expect that there will be issues associated with the taxation of the income that accrues from it and how this income can be properly tracked, assessed and taxed. This special General Assembly of Tax administrations in the West African sub-region provides a unique opportunity for frank and forthright discussions on how best we can protect our interests and maximize our benefits, not just as individual countries but as a regional bloc. “As the Competent Authority in Tax matters for Nigeria, I am pleased to say that we have actively participated in the global discourse around the issue of taxation of the digital economy, particularly as it affects the allocation of taxing rights. In this regard, we have continued to contribute our quota in different fora, most importantly at the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting, otherwise known as the Inclusive Framework (IF)”.
In his opening remark, FIRS Chairman, Muhammadu Nami said the Service realised in a single month – June 2021 realised N664 billion with the aid of taxpro max , an in-house technology developed by the Service.
The amount realised, he said represented the highest revenue generated by the FIRS in a single month since the outbreak of COVID-19.
“By way of sharing a little bit of what we are doing at the Federal Inland Revenue Service as Nigeria’s premier tax authority, we have recently deployed our integrated tax administration system known as the TaxPro Max, to ease tax administration and compliance”
“This cost-saving, effective solution that was developed in-house by the staff of the FIRS, is a user-friendly technological platform which is accessible by tax officers and taxpayers alike, for most tax operations”, FIRS boss said.