The Executive Chairman of the Federal Inland Revenue Service (FIRS), Babatunde Fowler, has again reiterated that the payment of VAT on VATable online transactions is required by the law. But while this is true by all means, Nigerians have continued to express their misgivings to this development.
There are many reasons why Nigerians have continued to express their misgivings over FIRS’ move to implement this policy starting early next year. Before we examine those, let us first briefly look at why the Nigerian Government is so focused on tax at the moment.
A broke government? There have been some indications that the Federal Government of Nigeria is seriously financially-handicapped. Bloomberg even reported earlier today that “Africa’s largest oil producer could run out of money if it doesn’t boost revenues urgently”. As such, the Buhari-led administration is making desperate efforts to generate more revenue.
#Nigeria FX reserves have been falling off since July. As foreign capital has flowed out over August the CBN has had to actively intervene to keep the NGN in line. We already had a 'queue' issue' which CBN penned as an administrative issue. Is this a convenient coincidence? pic.twitter.com/0GM5Xo2V37
— Walle Smith (@walesmit) August 27, 2019
VAT for the rescue: One of the ways the government hopes to bring in more money is obviously by focusing on VAT. This comes after a leaked memo revealed that the Presidency recently queried the FIRS boss over consistent failure to meet VAT target. Consequently, the FIRS has taken it upon itself to ensure that more money is generated for the government through VAT. Fowler himself even acknowledged that “VAT is certainly something that is required, as it is the fastest-growing tax type worldwide”.
But the FIRS’s move to collect VAT on online Transactions has generated quite a lot of controversies. Nairametrics recently reported that stakeholders in the E-commerce space have frowned against the move, citing that it could potentially cripple businesses.
Regular Nigerians have also expressed their concerns over the move. As expected, their main concern is that an additional 5% value-added tax on online transactions will only add to the hardship already faced by most Nigerians. Just yesterday, a Nairametrics reader named Ola Ilesanmi, left a thought-provoking comment on one of our articles. Ilesanmi’s comment reads in parts;
“I don’t actually know what investors will return as gains as from next January if an investor pays 1.statutory Charges on equities subscribed at 3.9% per transaction, 2. VAT on investment 5% per transaction, 3. VAT ( the percentage yet to be declared by FIRS ) on online transactions within or outside the country.”
Note that the FIRS had earlier explained on Twitter that this move is not intended to stagnate the growth of SMEs/MSMEs, particularly those operating in the online space. The tax body also clarified that only online businesses that do not currently pay VAT will be required to do so henceforth. Similarly, only VATable online transactions will be subject to this policy. However, despite this explanation, Nigerians have a lot of questions.
Madness overload. why cause more hardship instead of a better and more comfortable living status? empty heads every where
— Jesus babe (@ChidinmaEmma24) August 15, 2019
How do you propose to achieve this and not subject already-VATted goods to additional VAT? Does the FIRS have the capacity to clearly separate the goods that are yet to be subjected to VAT from the ones already at the final stage?
— Akin Gday (@gday_akin) August 16, 2019
You have not answered my question.
I totally understand the concept of input VAT. The issue here is the method of recovery.
How do companies recover input VAT if FIRS had collect the output VAT at source, via banks?
— Adesegun Onabajo (@Segun_bajo) August 27, 2019
Once again, the collection of VATs on VATable online transactions is expected to commence as early as January 2020.