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Updated: FG’s VAT charges on online transactions to commence

Effective from January 2020, the Federal Inland Revenue Service (FIRS) will begin to impose value-added tax (VAT) on online transactions.

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BREAKING: FG's VAT charges on online transactions to commence, firs, Illegal Tax Deduction: FIRS to refund General Electric, Arco $2 million 

Effective from January 2020, the Federal Inland Revenue Service (FIRS) has announced that it will begin to impose Value-Added tax (VAT) on online transactions, both domestic and international.

The Executive Chairman of FIRS, Babatunde Fowler made this disclosure at the African Tax Administration Forum (ATAF) technical workshop.

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The commencement date of the VAT charges on online transactions, according to Fowler, would be subject to the government’s approval.

Speaking on the new development, Fowler noted that a lot of countries had identified Nigeria as a good market and many of them were into online businesses. He added that there was a need to tap the potentials to generate more revenue for the country.

READ MORE: Why FG removed VAT on locally produced cooking gas

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Fowler’s words; “We have thrown it out to Nigerians. Effective from January 2020, we will ask banks to charge VAT on online transactions, both domestic and international.

“VAT remains the cash cow in most African countries, with an average VAT-to-total tax revenue rate of 31%. This is higher than the Organisation for Economic Cooperation and Development’s average of 20%.

“This statistics, therefore, is a validation of the need for us to streamline the administration of this tax with the full knowledge of its potential contributions to national budgets.

“It is, however, also bearing in mind the rights of our taxpayers,” he said.

Why this is important: For the FIRS’ boss, for a country that prioritises infrastructural development like Nigeria, VAT collection is critical for the sake of different projects at all level of the government.

Stakeholders kick: The Federal Government’s disclosed plan to introduce 5% VAT on online transactions had attracted criticism from Nigerians and industry stakeholders. Nairametrics engaged some tax experts to get their opinions. 

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  • Omotolani Ashiru, Lead, Internal Audit, Compliance and Tax at UPS, stated that while this will be a good development for the government as revenue would increase, it is not a good time for Nigerians.
  • Ashiru said necessary infrastructure, sensitization and other necessary requirements are not yet available in Nigeria.
  • She also added that in the case of the VAT charges on an online purchase, there will be issues of multiple taxation as some e-commerce platforms like Jumia are already charging VAT on their sales since there are no mechanisms in place for the banks to separate VAT inclusive services and products from non-vatable transactions. 
  • The tax expert further stated that the online purchase tax proposal appears at odds with Nigeria’s long-held ambitions for a cashless economy, given the possible effect of dissuading online purchases.
  • She maintained that if launched, it also adds to a growing number of existing charges which Nigerian bank cardholders already pay, including the card maintenance fee. 

READ ALSO: Federal Inland Revenue Service hints at harmonised Tax Bill

Similar to Ashiru’s point of view, Amanze stressed that consumers would rather not purchase goods online, which poses a significant drop in sales or would rather opt for the traditional model of paying for anything they want to purchase, which renders the Federal Government’s commitment to financial inclusion useless. 

Amanze also stated that should the VAT charges be effected, double VAT charges on consumers are certain, as most e-commerce companies at present charge you for VAT. According to Amanze, consumers would rather transact with cash to avoid the VAT charges.

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Patricia

Famuyiwa Damilare is a trained journalist. He holds a Higher National Diploma (HND) in Mass Communication at the prestigious Nigerian Institute of Journalism (NIJ). Damilare is an innovative and transformational leader with broad-based expertise in journalism and media practice at large. He has explored his proven ability in the areas of reporting, curating and generating contents, creatively establishing social media engagements, and mobile editing of videos. It is safe to say he’s a multimedia journalist.

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Coronavirus

COVID-19: WHO warns there may never be an immediate solution to the virus

WHO urged governments and citizens to focus on known basic steps to contain the pandemic.

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Virtual hackathon: WHO offers $20,000 to curb Coronavirus with African-tech solution, covid-19, coronavirus

The World Health Organization (WHO) has warned that there might not be an immediate solution or cure to the COVID-19 pandemic despite the positive outcomes at the different levels of trials of vaccines for the virus.

The WHO said that despite strong hopes for a vaccine, there might never be a silver bullet for COVID-19, and the road to normality would be long.

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According to the latest data, the coronavirus pandemic has infected over 18.1 million people with more than 690,000 fatalities globally since late January, when the virus was first reported. This is just as some countries that thought they worst was over for them started experiencing a second wave of outbreak.

The Director-General of the WHO, Tedros Adhanom Ghebreyesus, and Mike Ryan, WHO head of emergencies, urged governments and citizens to focus on known basic steps to contain the pandemic such as testing, contact tracing, maintaining physical distance and putting on a mask.

Tedros in a virtual news briefing in Geneva, said, ‘’The message to people and governments is clear, Do it all. He said face masks should become a symbol of solidarity around the world. A number of vaccines are now in phase three clinical trials and we all hope to have a number of effective vaccines that can help prevent people from infection. However, there’s no silver bullet at the moment, and there might never be.’’ 

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Chinese Investigation

The WHO officials revealed that an advanced investigation team that was sent to China where the virus started, are not yet back. The UN health agency sent an epidemiologist and an animal health specialist to China on July 10 to lay the groundwork for a probe aimed at identifying how the virus entered the human species.

Tedros said WHO and Chinese experts had agreed on the terms of reference and a programme of work for a WHO-led international team of scientists and researchers from around the world. They are to study the origins of the virus in the city of Wuhan.

The WHO boss encouraged mothers to continue breastfeeding even if they had COVID-19, as the benefits outweigh the risks associated with infection.

Tedros also said the international hunt for a vaccine has been historic against the backdrop of the coronavirus disease being the biggest global health emergency since the early 20th century.

Tedros said, ‘’There are many vaccines under trial, a couple in the final stage of clinical trials – and there is hope. It does not mean that we will have the vaccine, but at least the speed with which we reached the level we reached now is unprecedented.”

“There are concerns that we may not have a vaccine that may work or its protection could be for just a few months, not more. But until we finish the clinical trials, we will not know.”

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Patricia
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Business

Shoprite Nigeria is worth at least N25 billion

N25.6 billion price tag is only reflective of what Shoprite Nigeria’s operations is worth on paper.

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Shoprite

Africa’s largest retail chain, Shoprite, announced on Monday that it is has decided to divest from its Nigerian retail entity, Retail Supermarkets Nigeria, the owners of Shoprite Supermarket Nigeria.

Going by several media reports and social media accounts, the sale is close to being consummated and a buyer is already in line to purchase the company. Getting information on the purchase consideration for this deal can be difficult especially if there are non-disclosure clauses.

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For example, then Zinnox purchased Konga from Naspers (another South African firm) and AB Kinnevik two years ago, though the purchase consideration was not disclosed.  However, we do not know what Shoprite Nigeria is worth on paper.

What is it worth on paper? Going by the company’s most recent annual report published in June 2019, Shoprite values its equity in its Nigerian subsidiary, Retail Supermarkets Nigeria Ltd at R 1.164 billion (1.1 billion rands). This translates to about N25.6 billion using the official exchange rate. This is also an equivalent of $67.7 million. The exchange rates are modest and will certainly be higher if the transaction was to be at this valuation.

However, the N25.6 billion price tag is only reflective of what Shoprite Nigeria’s operations is worth on paper, what accountant’s callbook value. It could be more or even less depending on how the negotiation goes.

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Shoprite Nigeria business is also its second-largest, based on book value and next only to Angola.

How will it be funded? The potential investors will likely fund this transaction via debt or equity or a combination of both. Deals like this also take time to be completed even if an agreement is announced and will also be approved by the Securities and Exchange Commission of Nigeria and possibly South Africa.

We will keep you updated as we get more information.

Patricia
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Business

Social clubs, recreational centres to reopen August 14

The closure of all spas, bars, lounges, night clubs, cinemas, and game arcades remains in place.

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Social clubs, recreational centres to reopen August 14, Lagos International Trade Fair to get permanent site soon, Sanwo-Olu vows , Lagos State discloses road expansion plans in an effort to combat traffic, Lagos State cracking down on Uber, Bolt, Ocar a week after Okada, Keke Napep ban , LASG increases health workers’ allowances, commissions local production of face masks

The Lagos State Government has announced that social clubs and recreational centres will be allowed to reopen operations starting from Friday 14 August 2020.

Earlier today, the government released a statement via its official Twitter handle, in which Governor Babajide Sanwo-Olu was quoted to have said that the reopening would be subject to clearance and possession of the Provisional Safety Compliance Certificate. This clearance certification can be gotten right here.

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The Governor also added that at the moment, the safety clearance certificates are only being issued to social clubs with registered trustees.

READ MORE: Update: Lagos to reopen worship centres on August 7

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READ: EPL clubs to be fined £37 million each over suspension of matches

In the meantime, however, the closure of all spas, bars, lounges, night clubs, cinemas, and game arcades remains in place. Any of the listed businesses that reopen prior to the set date and without meeting the set guidelines will be shut down. A monitoring and enforcement team will be at work to ensure that the “guidelines and directives are complied with to the letter”.

The Backstory

As part of moves towards a complete easing up of the lockdown, the Lagos State recently announced the reopening of schools. The government also announced that the reopening of religious houses and places of worship would take effect from August 7.

However, this is subject to strict adherence to standard precautions that have been put in place. All schools are expected to provide hand-washing facilities and ensure physical distancing within their premises. The Lagos State government will make available face mask 200 schools to which this reopening exemption applies for the duration of the reopening.

Relevant agencies have been directed to carry out spot checks and random inspections of schools and defaulters will be sanctioned appropriately.

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