The Federal Inland Revenue Service (FIRS) has announced that it will commence Value Added Tax (VAT) on domestic and international online transactions from January 2020.
According to Babatunde Fowler, Chairman of FIRS, Nigeria has been identified by lots of countries as a huge untapped market and most of these countries are already running online businesses in Nigeria. He noted that there is a huge need to ‘tap the potentials’ and generate more revenue for the country. This move is subject to government regulations and approval.
In his words, “We have thrown it out to Nigerians. Effective from January 2020, we will ask banks to charge VAT on online transactions; both domestic and international. VAT remains the cash cow in most African countries, with an average VAT-to-total tax revenue rate of 31%. This is higher than the Organization for Economic Cooperation and Development’s average of 20 percent.”
See also: Egypt Set to enforce Tax on Social Media Ads & Digital Services
Mr. Fowler revealed that the statistics prove the need for them to rationalize the administration of this tax, knowing its potential contributions to national budgets. He noted that VAT is crucial to project developments at all government levels.
According to him, VAT revenue is distributed in this manner – 15% to the Federal Government, 50% to the state governments and 35% to the local governments. He noted that they wrote to all commercial banks in May 2018, in a request for a list of companies, partnerships, and enterprises with a banking revenue of N1 billion and above. This is in a bid to ascertain the companies that are submissive with the tax laws and those that are not.
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