Fowler’s Foul Play: FIRS Dents Online Payments With VAT

The head of the Federal Inland Revenue Service (FIRS) Mr. Babatunde Fowler and his team has announced plans to apply Value Added Tax (VAT) to online transactions starting from 2020. This has not gone down well with ordinary consumers in the country who think it will dent their choice in online payments. The Federal government’s resolve to diversify the sources of funding to run this economy is running on full throttle.

This move comes after the Head of the FIRS Mr. Babatunde Fowler in his reply to the query point to the low revenue stream and the lack of accountability of access to collecting revenue accruing from the sale of oil. It blamed the recession for the low revenue generated in the same period as compared with Jonathan administration. A critical look at online transactions makes me worry if FIRS is not applying a knee jerk reaction in response to the President’s query. The challenge the agency has to focus on critically is that a very large percentage of businesses in Nigeria is in the informal sector of the economy. Added to this is the fact that no real progress has been made to expand the actual number of individuals and businesses paying tax. Is VAT added tax to significant going to improve that position for the FIRS? What is the value of revenue from online transactions? First, CBN 2018 ePayment Statistics shows an impressive performance from all ePayment sources. POS payments last year contributed 2billion naira. Secondly, it is important to note that e-commerce businesses are already tethering on the brink of bankruptcy. The highs of pre-2015 revenue figures are a dream today.  How much value is earned from online transactions across e-commerce platforms? The FIRS has to appreciate the fact that a very large percentage of online transactions are no longer initiated nor terminated on e-commerce platforms.  Let’s be clear the social media – the likes of Facebook, Twitter, Instagram, and Pinterest are another means of connecting buyers and sellers. There no provision of a payment portal in the social media platform. The implication is that transactions are concluded via banking or payment applications. For example, Chioma posts pictures of her latest fabrics on Instagram her followers send her a direct message for prices. Once there is agreement Chioma contacts her delivery team or third party logistics company and sends her bank details to her buyer who then makes payment. The buyer has a range of options to choose from i.e. deposit cash into the account, mobile banking app, payment platform (Remita, Paystack etc) or ATM transfer. My guess is that when the ordinary consumer feels constrained by the VAT amount on the invoice he/she will choose to walk into a bank to conclude the transaction.


Source: Daily View