Unless our summations are wrong, the Federal Government may impose a six-per cent tax on turnover of non-resident blue-chip digital companies who sell products to Nigerian residents.
These may affect companies such as Alphabet (owners of Google), Apple inc., Meta (owners of Facebook), Twitter, and PayPal who render online services to Nigerian residents.
On Wednesday, Nigerian Finance Minister Zainab Ahmed announced plans to tax digital non-resident companies that sell products to local customers at 6% of turnover, as part of fiscal reforms to boost revenues and diversify the oil-dependent economy.
At around 4.5% of GDP, Nigeria has one of the lowest tax rates in the world and has struggled to increase tax collection from its non-oil sector.
The World Bank said last year Nigeria could raise the proportion to around 7% over the coming three years, assuming property tax, excise duty and personal income reforms are undertaken, and that non-oil taxes needed to be at least 12.75% of GDP.
“This is introducing turnover tax on a fair and reasonable basis,” Ahmed said referring to value-added tax (VAT) obligation of digital non-resident companies.
Such digital services include apps, high-frequency trading, electronic data storage and online advertising, Ahmed said in a televised speech discussing the 2022 budget signed into law last week.
Ahmed said the government wants to modernise taxes for its digital economy and to improve compliance.
She said digital non-resident companies do not need to be registered locally but would have an arrangement with the Nigerian tax authority to collect and remit taxes, as a way to reduce the compliance burden.
Nigeria has imposed additional excise taxes on cigarettes, alcoholic beverages and last year said it would consider introducing levies on telecoms airtime charges after it raised VAT to generate more money for the government.
The World Bank last year urged the country to issue the necessary regulations to implement the excise tax on telecoms airtime charges.
It has yet to be seen the modalities for the implementation of such a tax.