Online transactions levy: Raising new controversy in tax basket

If next year’s target for the kick-off of the tax or levy on online transactions sails through, there certainly would be interesting figures and government would be smiling to the banks for fat Cheques.

 On the other hand, there is an expectation of corresponding reactions, coupled with intuitiveness by many Nigerians, who would be plotting its evasion or avoidance. But most possible, there would be continued agitation for alleged “over tax” of the citizenry without corresponding evidence of adequate utilisation. Indeed, beyond the quest for the expanded fiscal regime and business of revenue mobilisation for acclaimed national development, it would be another period of putting to test the country’s level of compliance with the non-negotiable social contract, as inequality takes new height, while poverty level gets global reckoning. Of course, if there is one thing that the current administration under President Muhammadu Buhari had consistently done in the last four years, it is majorly tax project – from reforms, awareness, and enforcement to the creation of new ones. But there is still raging argument over the motives, save for the dwindling fortunes of the crude oil prices and its attendant effects on the country’s fiscal performance. There have been inventions and invocations of laws as a necessity, under which the ongoing hunt for whatever is called revenue in the face of dwindling economic fortunes is unavoidable. The volatility in oil prices — the country’s major revenue and foreign exchange earner, has been used as excuse. To cover the tottering revenue profile, three things have become outstanding and more pronounced, as well as recurring over these years, with similar historic pattern. They are “Diversification”, “Stamp Duties Act” and “Treasury Single Account (TSA)”. Almost, if not all the administrations, have played around them. In the last one year, the Value Added Tax (VAT) has been on the front burner, with a back and forth movement in respect of what should be included in the regime and what the percent should be. The rate consideration is currently rested. The latest in the discourse, is the plan to introduce a five per cent charge on online transactions with effect from 2020, entangled in not only its acceptance by the citizenry, given the biting economic challenges and disputations over government’s accountability, but also the observed misunderstanding of whether the charge is VAT on the transactions itself or levy on the medium of the transactions. Or whether it is the product to be purchased that will deserve the VAT. According to the National Bureau of Statistics (NBS), Web transactions in the first quarter of 2019, were estimated at 20.38 million, with a value of N107.64 billion. If the operations of eBillsPay and Remita, both found in the quarterly statistics of the agency, currently with a volume of 316,534 and 1.46 million, valued at N141.65 billion andN19.25 billion respectively, qualifies as online transaction, then there would be more to feast on by government. The Executive Chairman of the Federal Inland Revenue Service (FIRS), Babatunde Fowler, had recently said that the agency is currently tinkering on ways to bring the rising digital economy under the tax net, even though it been a difficult task.“We will address the issue of the digitalised economy very soon. Nigeria has not taken a position yet. But, we are meeting to see if we can come up with a global solution that we can all adapt to,” he said. But since the unveiling of the plan to effect the five per cent VAT on all online purchases from next year, it has not only been a mixed feeling, but major reactions from Nigerians are tilting towards outright rejection.The New Tax; THE Partner/Head of Tax and Corporate Advisory Services at PwC Nigeria, Taiwo Oyedele, said the proposal is part of measures being introduced to address issues bothering on the digital economy, generally believed that huge economic activities are being conducted without the payment of commensurate taxes.In an exclusive chat with The Guardian, the tax expert also said that the overriding objective of the latest move is to shore up government’s revenue. “The proposal is to charge VAT on all online transactions carried out by individuals and companies based in Nigeria regardless of whether the transactions are sourced from Nigeria or outside the country.“The intention is to appoint payment settlement institutions such as banks, credit and debit cards providers as agents of the FIRS for the purpose of charging and accounting for VAT on online transactions.  “The VAT will apply on all online transactions that are liable to VAT, including goods and services. In principle, VAT is already being charged and collected on online purchase of goods. In the case of products supplied within Nigeria, the sellers would already charge VAT on the goods failing which they can be audited by the FIRS. “In the case of goods ordered from foreign online suppliers like Amazon, the applicable VAT should normally be collected by customs upon importation except where the goods are VAT exempt or below the chattel exemption threshold. “There is also no problem with online services provided by suppliers based in Nigeria such as Multichoice since FIRS can enforce VAT on their sales where applicable.“The major challenge is therefore with respect to online services and purchases relating to intellectual property from foreign suppliers such as Netflix and Facebook,” he said.


Source: Guardian