After the novel COVID-19 struck, global business patterns took a significant shift. Worldwide quarantine order and the need to keep social distance to contain the spread of the deadly virus mandated new business strategies to emerge. Since then, global business has never remained the same.
The pandemic launched the world into a new digital era, necessitating that most business dealings are done online. Schools now subscribe to moodle platforms online, adopting blended courses with Coursera, Udemy, and other online pro-educational platforms.
Many Nigerian hospitals, for example, have now gone fully digital in their mode of attending to patients. The old system of carrying files and presenting physical cards now seems to be phasing out.
More interestingly, familiar business services like advertisement, recruitment, training and facilitation, banking, tailoring, sales, and so much more are offered remotely through various online platforms like Instagram, Facebook, Twitter, Amazon, Alibaba, WhatsApp, Telegram, and so on. The entertainment sector is not left out as most cinema outings have now been domesticated by YouTube and Netflix live streaming services.
Read Also: FG sees Infrastructure, logistics as key impediment to Covid-19 vaccine deployment
These services have made the world a more remotely profitable space. The speed, ease and sizable cost that comes with transacting businesses now favour all and sundry.
However, many of these digital platforms that bear the services enjoyed by all seem to be soaking in most of the benefits of providing the services they render. Most times, they operate without remitting any percentage to the countries’ government where they remotely work.
In Nigeria, the government has observed that several non-resident global technology and digital firms that make significant profits from their operations in the country do not pay taxes. These tax losses to the government are substantial enough to raise concerns about Nigeria’s digital space being susceptible to foreign interests without control or consequences.
According to the Vice President of Nigeria, Professor Yemi Osinbajo, the country’s digital space needs to be protected from uncontrolled foreign interests and the opportunities that come with non-resident foreign businesses operating and profiting from the Nigerian digital space must be tapped. The revenue base of the country can be further widened if taxes from these tech operators are collected.
“I think the most important thing is that we must widen our tax net so that more people who are eligible to pay tax are paying. Several efforts have been made, and I am sure you are aware of the initiatives including the Voluntary Assets and Income Declaration Scheme (VAIDS), which was also an attempt to bring more people into the tax net, including those who have foreign assets” he said, during a visit by the delegation of the Chartered Institute of Taxation of Nigeria, CITN last Friday.
Professor Osinbajo further said, “We have also recently taken a step concerning many the of the technology companies that are not represented here but who do huge volumes of business here. The Finance Act has shown that we are very prepared to ensure that these big technology companies do not escape without paying their fair share of taxation in Nigeria. Many of them do incredible volumes here in Nigeria and several other parts of the region”.
According to Osinbajo, required regulations have been drawn in favour of revenue resources that can be tapped into by the new tax programme.
At the international level, there are current talks on global standard rules for governments to receive taxes from digital and tech firms with a significant economic presence in foreign countries. Hence, this new move is not limited to the Nigerian space alone.
Hence, by the Nigerian Finance Act, 2019, Section 4, which states that “the Minister (Finance) may by order (of the President) determine what constitutes the significant economic presence of a company other than a Nigerian company”, the government is permitted to determine operating businesses that fall under the “significant economic presence” category and tax them appropriately.
Furthermore, the Minister of Finance, Zainab Ahmed, has introduced the Company Income Tax (Significant Economic Presence) Order, 2020, an amendment of the Finance Act 2019. The amendment is set to ensure that foreign companies which operate businesses in Nigeria and have a significant economic presence must be taxed.
Twitter, Facebook, Instagram, Netflix, Alibaba and Amazon are some of the foreign digital companies affected by the new tax law in the country.
Regarding the new tax move, the Federal Government has denied any motion to increase taxes in Nigeria.
