• Friday, March 29, 2024
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E-commerce players, others tackle FIRS on planned 5% tax on online transactions

FIRS

Plans by the Federal Inland Revenue Service (FIRS) to commence collection of Value Added Tax (VAT) on online transactions as part of measures to shore up revenue target of N8 trillion set in the 2019 budget may not be sitting well with stakeholders in the segment.

In two separate interviews, the first in May and the second in August, Tunde Fowler, chairman of FIRS, said from 2020, banks may be mandated to collect 5 percent VAT from customers using bank cards for online purchases.

Since the August interview published by Premium Times went viral, many Nigerians who believe the move is an affront on cashless drive have taken to social media to condemn the plan. They also say it amounts to double taxation. Nigerians already pay different charges for online
transactions.

“Welcome to Nigeria where we take five steps forward with the cashless policy and 20 steps backwards to the stone age of carrying cash around,” tweeted Ifeoma Solanke, a lawyer, from her
handle @ifeoma_solanke.

“What in the name of Zeus is 5% VAT on online card purchases? Aren’t we tired of double taxation?” A former presidential aspirant, Garba Shehu, also tweeted from his handle @ adamugarba that the Federal Government’s move was not strategic at a time when the country needed to catch up “organically” with the world in terms of digital development.

“Focus should be on digital inclusion not red tapes,” he said. The Value Added Tax Act of 2007 governs the administration of VAT in Nigeria. VAT is levied at each stage of the production chain at 5 percent of the value of the taxable good or service supplied, but it is eventually borne by the final consumer, being a consumption tax, according to experts at Andersen Tax.

In essence, VAT collection is not a recent development. Consumers have always paid for it when they make purchases in physical stores but most companies do not remit the tax to FIRS contributing to the shortfall in the country’s revenue.

The government in recent times has hinted that it might resort to increase in VAT to stem the tide. Fowler, in the interview, had, however, expressed a preference for expanding the country’s tax base against increasing taxes. Efforts to achieve this expansion in the past had led to the launch of the tax amnesty programme in 2017 during which tax evaders and defaulters were
encouraged to pay within a certain period without penalties. The FIRS claimed it was able to collect $47 million from the evaders.

Fowler, however, suggested that getting over 40,000 companies “not doing the right thing” to comply has remained a big challenge.