Stakeholders Oppose FIRS Bid To Tax Online Transactions, Say 'Don't Double Tax Nigerians'

The move by the Nigeria's tax agency, FIRS, to imposed VAT on Nigerians' online transactions has been criticized by tax experts who say it amounts to double taxation.

The Federal Inland Revenue Service (FIRS) Boss, Babatunde Fowler, had said the online transactions tax is a measure to help the agency hit its N8 trillion revenue target for the year 2019.

“Soon, we will ask banks to impose VAT on online transactions for purchases of goods and services. Not that it is something new; it actually should be in existence., he said. Adding, “We will certainly follow up to make sure that every VAT that is due to be collected is collected.” 

But, stakeholders have said the move comes under what is known as duplicate taxation.

Taiwo Oyedele,  head of Tax and Corporate Advisory Services at PwC Nigeria who spoke with LEADERSHIP said “The reality is that if you go online to make transactions on Jumia or any of these platforms, there is already VAT. If you book a hotel online in Nigeria, there is already VAT on it, so the online businesses and transactions that are owned by entities in Nigeria, already pay the VAT.

Further, he said, "The FIRS does not have to impose the VAT on them, it is already being paid. “To book a flight online, you pay VAT. Now, where the difficulty is, is when you do the online service by a provider outside Nigeria, for example if you go on Amazon and you order a product, because Amazon is not a Nigerian company, then there is no Nigerian VAT. 

“So, the way that is done is that you pay them the full amount and they ship to you in Nigeria, by the time it gets to customs, if the amount is below the threshold where you don’t have to pay, you don’t pay anything. So, the question is how the FIRS would be able to impose VAT. If you want to watch a movie on Netflix, you just go to Netflix to subscribe, you pay and then watch a movie. 

"The ones where they can impose, VAT are already being imposed. The ones where VAT is not currently being charged, the FIRS has no mechanism to be able to do that so it will be interesting to know exactly what they have in mind.

 “It is not just about Nigeria, it is a global problem that is why we have the global committee on the digital economy and they are trying to fix it because it is not a problem that one country can solve. It is a problem that requires the whole world to come together.” 

Concerned about the effect such move will have on the nascent E-commerce industry, Razack Olaegbe, deputy managing director, eMaginations Limited,  conseled the FIRS to engage the e-commerce and online companies before carrying out any clampdown action, stating that many of the e-commerce firms are yet to break even.

“Clamping down on the companies should not be the first step, FIRS needs to engage them to understand their business model, find out if they are making money. 

Jumia and Konga, are they profitable? E-commerce is yet to thrive in this country. We shouldn’t use threats of clampdowns arbitrarily as it scares away foreign investors,” he said.