The Nigerian lottery and gaming industry has seen a lot of growth and expansion in recent years. This is mostly driven by the growing popularity of the sports betting segment fuelled by the huge followership of premiership football and other similar sporting activities. The number of participants in this industry has been on a steady increase and this corresponds with increased level of transactions. It is expected that the industry will continue to grow due to its popularity and acceptance by the Nigerian sports enthusiasts.
The industry has attracted renewed attention from the Federal Inland Revenue Service (FIRS) whose mandate is to collect taxes from all taxable economic activities. With a revenue target of N8trillion for 2019, the FIRS has been quite bullish in its tax collection efforts to ensure it meets this target. The FIRS recently announced its intention to enforce the collection of Value Added Tax (VAT) on lottery and gaming activities. The plan is to automate the process of VAT collection directly from the operators of lottery and gaming machines. This was disclosed at the stakeholder’s meeting recently organised by the FIRS in conjunction with the National Lottery Regulatory Commission (NLRC). Many stakeholders are concerned about this development as the charge of VAT on stakes (bets) may discourage bettors (people who place bets) from using their services and encourage the use of informal and foreign operators, which will lead to loss of revenue.
Understanding the lottery and gaming industry in Nigeria
The gaming industry in Nigeria comprises of several segments such as; sports betting (which has both online and offline versions), casinos, pool betting, gaming machines, scratch cards and interactive games, promotional competitions run by companies like banks and telecommunication companies, public and private lotteries. The industry is governed by the National Lottery Act 2005 (NLA) and The National Lottery Regulation 2007 (NLR) at the federal level and Lagos State Lotteries Law 2008 (LLL) in Lagos state. Within the Nigerian regulatory framework, the word ‘gaming’ is one that is associated with many judiciary and statutory definitions and perceived to be subsumed under the word “Lottery”. Based on Section 57 of the NLA, lottery includes any game, scheme, arrangement, system, plan, promotional competition or device for the distribution of prizes by lot or chance, or as a result of the exercise of skill and chance or based on the outcome of sporting events, or any other game, scheme, arrangement, system, plan, competition or device, which the President may by notice in the Gazette declare to be lottery and which shall be operated according to a license. Similarly, Section 48 of the Lagos State Lotteries Law 2008 (LLL), defines lottery to include any game, scheme, arrangement, system, plan, or device for distributing by lot or chance and any game, scheme, arrangement, system, plan or device, which the Commissioner may by notice in the Gazette declare to be a lottery.
Are lottery and gaming activities VATAble?
VAT is administered under the VAT Act Cap V1, Laws of the Federation of Nigeria, 2007 (VATA or the Act). Based on VATA, VAT is chargeable on all goods and services except those specifically exempted under the Act. It is common knowledge that lottery and gaming activities cannot be classified as a good and the word “service” is not defined under the VATA and the Interpretation Act. This notwithstanding, we can obtain guidance from the Blacklaw’s dictionary which defines service as the act of doing something useful for a person or company for a fee. It is also defined as – work performed for pay or paid work by another person, either by contract or as an employee. In these definitions, the word service alludes to doing something for a consideration. So does this apply to lottery and gaming activities?
Source; Mondaq
