The Federal Government has concluded plans to tax Netflix, Facebook, Amazon and many other foreign digital services. These companies have long been exempted from tax, but the government has widened its tax bracket to the digital platforms in order to expand its revenue generation.
This comes after the government admitted that coronavirus has affected most of Nigeria's revenue sources. And these digital platforms have gained more amidst the pandemic following the major shift and increase in online patronage. Due to the digital firms' lack of physical presence in Nigeria, taxing them has been difficult, but FG has initiated a new policy that will enable the tech giants to pay tax to Nigeria.
Companies That Will Be Affected
FG, through the Companies Income Tax issued by Finance Minister, Zainab Ahmed, will only tax foreign digital companies with Strong Economic Presence in Nigeria. And major streaming platforms, social media platforms and e-commerce websites offering video, audio and advertising services fall under this umbrella.
The Companies Income Tax is expected to affect or cover the likes of Facebook, YouTube, Netflix, Amazon, Alibaba, Apple and many more despite these companies not having a brick and mortar structure in Nigeria. But according to a report by Punch, due to their Strong Economic Presence within the country, they qualify to be taxed.
It was stated that since their services or goods are purchased in Naira and have strong footprint in Nigeria, they are liable to be taxed by Federal Inland Revenue Service (FIRS). Although, it is unknown if the new policy will be accepted in the international space as FIRS doesn't have authority beyond Nigeria.
The digital companies with N25 million as income annually or equivalent in other currencies in Nigeria will be taxed. Also, the digital companies with a Nigerian domain name (.ng) or a website address in the country are also taxable.
Network Providers Want Facebook, WhatsApp To Pay Levy
Nigeria's decision to tax foreign digital companies comes nine months after network providers stated that it want social media platforms like Facebook and WhatsApp to pay the levy as SMS becomes unpopular among Nigerians.
In October last year, the Chairman of the Association of Licensed Telecoms Companies of Nigeria (ALTON), Gbenga Adebayo, said, “Today, more people send WhatsApp messages, they send messages over the social media platforms than they do on the conventional SMS platform.
“Operators have been licensed to provide voice, SMS and data services for which they are licensed and being charged annual operating levy. OTT doesn’t have such and there is even loss of revenue to the regulator of the country too because they are not paying for rendering those services. That is why we are saying that our regulator must begin to look away from technology neutrality,” Adebayo said.