Nigeria should provide attractive tax-based incentives to tech companies to tap into the three trillion naira global digital economy, legal experts have said.
This was revealed at the 14th edition of the lecture themed ‘Taxation of the Digital Economy: Challenges and Prospects for the Nigerian Economy’, held last week.
The annual lecture hosted by Punuka Attorneys and Solicitors presents participants the platform to deliberate on topical issues in law, governance and nation building.
“Globalization has brought about digital trade which has increased growth in major sectors of the economy such as trade, commerce and even taxation,” Ije Jidenma, President, Institute of Directors, Nigeria said.
“It is interesting to note that the digital economy is valued at three trillion dollars according to the Organization for Economic Cooperation and Development (OECD). The Nigerian government needs to tap into the numerous opportunities that this digital economy provides.”
Clem Abga, minister of state, budget and national planning noted that the digital sector contributes 16 percent to the GDP, enabling a diversified economy.
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Abga also pointed out that the digital economy will raise GDP by 15 percent by 2025. “A lot of developing countries are yet to fully harness taxation as a source of revenue.”
According to OECD, a digital economy is one which incorporates all economic activities reliant on or significantly enhanced using digital inputs. This implies that all the producers and consumers utilize these specific digital inputs in carrying out their economic activities too.
Experts said it is imperative to examine incidental issues on taxing the digital economy as it presents the Nigerian Government with huge potential and at the same time tax policy may be a disincentive for the growth of the digital business.
“Undoubtedly, despite the persistent growth in the digital economy over the last decade, the economy will be at a great disadvantage if effective taxation initiatives and policies are not put in place timeously,” said Elizabeth Idigbe, managing partner, Punuka Attorneys and Solicitors.
Idigbe further said that then the outbreak of the COVID-19 pandemic further promoted a plethora of entities to move their businesses online with little or no need for physical presence even at the onset of the pandemic.
On his part, Alexander Ezenagu, Assistant Professor, Taxation and Commercial Law, Khalifa University, Qatar said annual tax revenue loss for developing countries is more than $100 billion and the digital economy is set to play a key part if not adequately addressed
“For instance, the digital economy in Nigeria is valued at approximately $100 billion in terms of revenue flow which is significant tax revenue potential for the governments,” Ezenagu added.
Other experts recommend that the country should leverage the amendment of the Finance Act so as to embark on a major infrastructure overhaul and focus on the deployment of technology to enhance and implement the act.
