Leading global technology corporations, including Google, Netflix, and Facebook, have contributed a staggering N1.98 trillion in taxes to the coffers of the Federal Government within a span of 15 months.
These funds, encompassing Company Income Tax (CIT) and Value Added Tax (VAT), highlight the pivotal role played by foreign companies in boosting Nigeria’s digital economy.
This remarkable figure, backed by data sourced from the National Bureau of Statistics, underscores the profound financial contribution that multinational digital service providers are making to the nation.
CIT, amounting to 30% of companies’ profits, and VAT, at 7.5% of consumer purchases, collectively form the cornerstone of these substantial financial contributions.
The Federal Inland Revenue Service (FIRS) introduced CIT and VAT as a means to channel financial support into critical sectors, foster economic growth, and maintain a sustainable taxation framework.
These contributions underscore the strategic importance of the digital sector within Nigeria’s broader economy.
Initiated in 2020, the Federal Government’s resolve to tax foreign digital service providers catering to Nigerians has resulted in an effective tax regime.
The Companies Income Tax (Significant Economic Presence) Order, 2020, issued by the former Minister of Finance, Zainab Ahmed, targeted foreign entities earning revenue in naira while offering services to Nigerian consumers.
Notably, this taxation policy applies to video streaming platforms, social media networks, and companies that provide downloadable digital content.
The objective of this policy is to ensure equitable taxation while enhancing revenue streams for the government.
Despite concerns about increased costs on consumers, the new tax framework aims to modernize taxation in the digital economy, in line with global standards.
This approach shifts the onus of VAT collection to non-resident digital entities, enabling a comprehensive approach to taxation and compliance.
The tax data, sourced from the Finance Act, indicates that foreign firms that generated income exceeding N25 million or equivalent in other currencies from Nigeria within a year are subject to these tax provisions.
With the exponential growth of digital transactions, the need for fair and reasonable taxation mechanisms remains paramount.
In line with global practices, the Federal Government is working to ensure effective tax collection by partnering with digital service providers.
These strategic collaborations, such as the one with Amazon, will streamline tax collection and revenue remittance, providing a sustainable framework for the growth of Nigeria’s digital economy.
This fiscal engagement is a testament to the evolving dynamics of the Nigerian economy, where foreign digital giants contribute significantly to the nation’s financial well-being while modernizing the tax framework in line with global standards.
Do you want to share a story with us? Do you want to advertise with us? Do you need publicity for a product, service, or event? Contact us on WhatsApp +2348183319097 Email: email@example.com