• Expert says the proposed 5% VAT is backed by law with no new effect on buyers.

Nigerians have kicked against the proposed 5% value-added tax on all online purchases from next year.

Babatunde Fowler, FIRS chairman, in a recent interview, had explained that the tax agency is working on ways to tax the burgeoning digital economy in the country. Fowler said it is difficult to bring the digital economy into the tax net the world.

“We will address the issue of the digitalised economy very soon. Nigeria has not taken a position yet. But, we are meeting to see if we can come up with a global solution that we can all adapt to,” he had said.

What does this mean?

This means that for every N10,000 transaction you make online with your bank card, the FIRS will charge 5%. This is N500 of the N10,000 purchase, making a total of N10,500 for every purchase you make online.

Nigerians kick, describe proposal as anti-people

Nigerians decried that the policy is anti-people, saying it will amount to double taxation. Many believed most of the items sold on e-commerce, for instance, are tax inclusive and extra 5% for card purchase online will amount to extortion.

Akin Alabi, a Nigerian businessman, and a lawmaker said the government should come up with policies and actions that will support the digital space and not taxing them out of business.

The tech industry is one of the few bright lights in Nigeria in the last 10 years or so. “Our government (states and federal) must come up with policies and actions that will aid and support them to grow, not just taxing them. It’s not hard to help them.”

“Of what use is the cashless policy of the Central Bank if the government is trying is heavily levied tax burden on the digital economy,” another social media user said.

Expert says 5% VAT on digital economy is not double taxation

Peter Nwaobi, a tax expert at KPMG, said the proposed 5% VAT on online purchase is not a double tax and there were no initial charges on purchases.

Nwaobi explained that for every online transaction, there is always a 5% VAT on every item. 

"Before now, for every time you get online, the merchant already charged 5% VAT on it, either you see it on slip or not. it is there." 

He said the fee is what the FIRS is running after as majority of the funds have not been captured in the tax net. "This idea will allow the merchant to remit the 5% they have charged to the bank (acting an agent in this instance)."

The government said it is planning to introduce the policy in 2020. The Ministry of Industry, Trade and Investment projected the Nigerian digital sector to generate $88 billion and create 3 million new jobs over the next few years.