Online Transaction VAT Collection And Its Negative Effects On E-Commerce

More than 160 countries around the world use value-added tax, nevertheless most commonly found in the European Union are not without controversy. It was in 2018 implemented in United Arab Emirate, the first in Middle-east countries to introduce VAT.

Most of these countries; if not all get value for any tax paid by citizens and the process will not be skewed to favour the poor nor the rich. However, Nigeria has joined other European nations to implement VAT collection on goods purchased in the markets but has recently proposed extension of its VAT net by including the newly ‘Online Transactions’ known as e-commerce, which the CBN fashioned to promote cashless economy. People were discouraged from carrying cash rather shop online to reduce the pressure on paper money and other factors alike. Recently, the Federal Inland Revenue Services, FIRS, through the Chairman, Mr. Babatunde Folwer ,whose agency is the Federal Government’s dependable organ for the steady accretion of non-oil, tax-based revenue to service the Federation Account ,most done at the citizen’s expense. It is very good to collect VAT as it has generated so much money for the federal government but extending it to online products which was still in a tutelage as long Nigeria is concerned is something that should be looked into because in the course of generating more money for government, it might defeat whatever objectives cashless policy portends. However, economic experts say, there are other means of generating revenue without frustrating the efforts of the citizens striving to make ends meet, in a fragile economic nation. Critics opined that VAT charges on online transaction are essentially a regressive tax that places an increased economic strain on lower-income earners, and also adds bureaucratic burdens for businesses. Experts have lamented that collecting VAT for online transaction might shut down the emerging online business which serves as a rescuer for the country unemployed young citizens. However, stakeholders have rejected plans by the Federal Inland Revenue Service, FIRS, to tax online transactions, saying it will amount to double taxation. Chairman of FIRS, Mr. Babatunde Fowler, while speaking in New York, said that the agency will soon begin collection of Value Added Tax, VAT, on online transactions. Fowler said: “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. “We will certainly follow up to make sure that every VAT that is due to be collected is collected.” He explained that the move was part of measures by FIRS to meet its N8 trillion revenue target for 2019. Fowler said the agency had started taking action against companies and businesses that refused to embrace federal government economic policies. According to him, FIRS hopes to generate between N750 billion and N1 trillion from the clampdown, which includes the closure of defaulters’ bank accounts. “We are going after everybody. I am sure you have heard that we have placed a lien on some accounts of defaulters that have a billion naira turnover annually. “So, certainly, we are not leaving anyone out of the tax net,” he said. Officially known as the Voluntary Asset and Income Declaration Scheme, the tax amnesty programme was launched in 2017. It gave tax defaulters a one-year period of grace to declare and settle their unpaid taxes. There have been complaints by some taxpayers of being wrongly targeted by FIRS in the clampdown. Commenting on that, Fowler admitted, blaming it on “administrative error,” arising from the huge number of accounts involved. “Well, there is certainly one or two instances where we made an administrative error, but when you are looking at over 50,000 accounts, there is a tendency that sometimes an error might be made. “For those that we made errors on, I wrote them personally apologising and of course, we lifted the lien on their accounts.” Reacting, the Head of Tax and Corporate Advisory Services at PwC Nigeria, Taiwo Oyedele, said the Federal Internal Revenue Service, FIRS, does not have the capacity to tax online transactions, which are already being taxed in the country.


Source: Aljazirah