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Nigeria Joins Canada, Thailand and others in taxing digital companies

Nigeriain government has begun to amend its laws to accommodate this new digitalized era bringing many big techs under serious scrutiny.

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Nigeria Joins Canada, Thailand and others in Taxing Digital Companies

Nigeria is one of many countries that have begun to amend its laws to accommodate this new digitalized era bringing many big techs under serious scrutiny. It is all part of a move by governments around the globe to introduce digital taxes.

Recent reports showed that there has been an uproar on social media with some concerned citizens speaking against the new tax laws included in the amendment of the Finance Act 2019 in Nigeria. Tech companies’ especially big techs, in the past few years, have faced a myriad of backlash about their involvement in tax evasion; and even more intensely, with the pandemic, came a microscopic look into the affairs of these digital service providers.

In Nigeria, one of the 129 countries under the Organization for Economic Cooperation and Development (OECD) which has yet to conclude an international agreement on digital taxation had the Finance Act 2019 amended with the aim of imposing tax on a foreign entity with respect to certain services or digital transactions if it had a ‘Significant Economic Presence’ in Nigeria, although what that entails is yet to be determined.

The new regulation would apply to companies with income of N25m or equivalent in other currencies from Nigeria in a year, and those with a Nigerian domain name (.ng) or a website address in the country.

READ MORE: Nigerians react as FIRS Chairman asks companies to pay tax before due date

Also, a foreign entity providing technical services such as training, advertising supply of personnel, professional, management or consultancy services shall have a SEP in Nigeria in any accounting year if it earns or receives any payment from a person resident in Nigeria, a foxed base or agent of a foreign entity with the exemption being payments made to employees of a foreign entity or for teaching in an educational institution.

Nigeria Joins Canada, Thailand and others in Taxing Digital Companies

Why this is Important?

As it stands, Nigeria, unlike some other countries, has no serious digital tax plans making the updates to the Finance Bill redundant pending a definition on the criteria for SEP. However, the existence of this law is still significant as it reduces the legal, political and civic resistance to any future digital tax plan, and giving the Minister of Finance full power regarding this makes it easy for Nigeria to implement the OECD plan when it is ready.

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The economic instability is the country is remarkably disturbing and the taxation system has always been used to help distribute aggregate income more equally which by all indications ultimately protect the stability of any society. There is no better time than now seeing as with this COVID-19 era the gap of income inequality will continue to grow so this as an option to mitigate the effects is more than welcome.

Yes! There are Challenges

There are concerns as to how the Federal Inland Revenue Service (FIRS) would enforce compliance without international consensus, as a number of the companies affected might be outside the territorial reach of the agency and this problem will be worsened where the companies sell their products and services directly to individual consumers in Nigeria.

READ MORE: FG to facilitate tax incentives for SMEs

A few Considerations Moving Forward

  1. All developing countries, not just Nigeria will need to maintain pressure on the inclusive framework committee so that their interests can be accommodated in future digital practices.
  2. Regardless of the loopholes, many tech firms have used to evade paying taxes, in introducing new tax measures, it is important to avoid segregation between digital and non-digital activities.
  3. Tax measures should only balance the tax burden without overtaxing digital companies with the goal being to preserve neutrality and competition between companies operating in the digital and traditional spheres with fostering the economic development and the growth of startups.

No doubt it can be tempting to try and make up for the lost time without tax payments by these digital firms but it is important that policymakers be deliberate about the neutrality of their demands as ultimately, society is rapidly becoming core digital.

 

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Jenrade is a Senior Marketing Analyst at NetPlusDotCom. NetPlusDotCom is a technology and digital payment company, with a mission to provide innovative payment digital solution. The company has a content partnership with Nairametrics. All articles written by Jenrade or NetPlusDotCom are their opinions and do not represent the opinions of Nairametrics.

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Business

CBN reportedly suspends Paystack and other non-bank financial institutions from offering BVN validation services

Non-banks may have to look for alternative ways to carry out identity verification for their users, following new CBN regulation.

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Fintech

The Central Bank of Nigeria has reportedly suspended finTechs and other third-party partners from offering BVN validation service.

This was made known in an email from Paystack to customers which stated, “We’ve recently been made aware of a regulatory directive from the primary custodian of Nigeria’s BVN service to all their partners to suspend the provision of the BVN validation service to their third-party partners. This directive affects every non-bank in Nigeria that offers BVN Validation services. In light of this news, we’re hereby informing you that the BVN Resolve service will be temporarily unavailable starting at midnight, April 8, 2021.”

READ: How scammers use SIM cards to rob your bank accounts

READ: CBN instruct banks to close accounts related to Crypto

What this means

This suspension could mean that non-banks will have to look for alternative ways to carry out identity verification (KYC) for their users through NIN, Voters ID, Driver’s license etc.

Details soon…

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MTN USSD dispute: Meetings with banks, others still inconclusive

MTN has confirmed in a statement that the issue with banks regarding USSD services is yet to be resolved.

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Bank CEOs, NCC, CBN to meet over USSD charges

Series of meetings held among MTN, commercial banks and FinTechs to align on longer-term pricing structures on USSD services appeared inconclusive.

This was confirmed by the Telco giant in a statement issued by its spokesperson, Funso Aina on Thursday.

According to the statement, which was seen by Nairametrics, MTN stated that the streamlining it undertook is international standard and best practice as scale is built along distribution channels.

It stated, “We will provide a further market update once these discussions have been concluded. The streamlining MTN undertook is international standard and best practice as scale is built along distribution channels. We are confident that partners in the banking sector will work with us to ensure this process concludes as quickly as possible to the benefit of the entire industry.”

READ: FG stops telecom firms from withdrawing USSD services as minister intervenes

Full statement below

Update on banking channel partners’ dispute and expansion of channel network.

Following the temporary suspension of sales of MTN products through our banking channel partners on April 2, 2021, services were restored on Sunday, April 4, 2021 with customers able to access all services.

This was agreed on the basis that MTN would revert to its previous cost of sales structures with banking partners until a new long-term agreement can be reached on a sustainable pricing structure going forward.

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Consequent on the intervention of the Minister of Communications and Digital Economy, the Nigeria Communication Commission and the Central Bank of Nigeria, since April 6, 2021, MTN has been participating in a series of meetings to align on longer-term pricing structures.

READ: NIPOST reclaim stamp duty collection from FIRS after years of dispute

We will provide a further market update once these discussions have been concluded. The streamlining MTN undertook is international standard and best practice as scale is built along distribution channels. We are confident that partners in the banking sector will work with us to ensure this process concludes as quickly as possible to the benefit of the entire industry.

MTN would like to thank our customers for their patience, and express our regret at the inconvenience imposed on them while banking channels were offline. In order to further expand the range of channels available to customers, MTN has activated a number of new channel partnerships with fintech partners and these will remain in place, significantly expanding the channels available to our customers and increasing our sales and distribution network.

READ: CBN freezes 11 bank accounts of companies, individual

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The new channel partners include Sparkle, Konga Pay, Barter By Flutterwave, Jumia Pay, OPay, Kuda, Carbon, BillsnPay, MTN On-Demand, MTN Xtratime airtime loans (*606#), myMTN Web http://mymtn.com.ng and Momo agent *223#.

We would also like to thank the Ministry of Communications and Digital Economy, the Nigeria Communication Commission and the Central Bank of Nigeria for their rapid intervention and we look forward to a mutually acceptable solution that empowers all ecosystem participants.

READ: CBN: Over N3 trillion (72%) of Intervention Funds remain outstanding

What you should know

  • Banks lifted the ban placed on MTN subscribers from recharging their lines or data plan via Unstructured Supplementary Service Data (USSD), according to Nairametrics.
  • This was confirmed by our analyst, who recharged his line using the USSD code of GTBank last Sunday.

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