June 10, 2021 / 2.00PM / Ottoabasi Abasiekong for WebTV / Header Image Credit: LinkedIn: Detail Commercial Solicitors
Stakeholders at the Detail Solicitors forum on "Taxation of the Digital Economy" agreed that the provisions and laws covering taxation in Nigeria should be rejigged with clarity and consistency for technology companies.
Mr. Chukwudi Ofili, Associate Partner, Detail Commercial Solicitors the moderator in his opening remarks said according to the World Bank, the digital economy accounts for 15.5% of the Global GDP, revealing how critical it was to economic activities and trade.
He noted that in 2018, the Nigerian Investment Protection Commission explained that the Nigerian digital economy is expected to generate $88bn and create three million new jobs at the end of 2021.
With the impact of the digital economy globally and at the national level, Chukwudi highlighted the fact that a huge challenge was the difficulty of countries establishing taxing rights over the profits of multinational enterprises(MNEs) operating in their jurisdictions.
Speaking on the backdrop of the June 5th, 2021 agreement amongst G-7 Finance Ministers to increase taxing on Global tech companies at the minimum rate of 15%, coupled with the Finance Act 2019 of Nigeria provisions on Significant Economic Presence and Non-Resident Companies led to the conversation on taxing the digital economy.
Mr. Akinwale Alao, Associate Director, Consumer and Industrial Markets Tax, Regulatory and People Services, KPMG Nigeria said companies under the technology sector operate under the overarching tax provisions in the country.
He said on a broad level the taxes are either direct or indirect, while the direct tax covers the taxation of companies for example Nigerian tech companies will have both profits from domestic and international operations taxed.
In essence, the KPMG expert stressed that the taxation process hinged on the economic presence of the technology company. He cited the Finance Act 2019 which gives the Minister of Finance, Budget, and National Planning the scope of determining the Significant Economic Presence of companies, which covers Non-Resident Companies for taxation.
For indirect taxation, the consideration was no longer whether the entity was operating in Nigeria, but when it carries out services in Nigeria.
Speaking further he raised the need for Nigerian companies to gain more awareness on the tax provisions, covering the transactions with global digital services providers.
He also added that the inconsistencies in the tax provisions and policies will affect the perception of Multinational Companies when it comes to investments and doing business in Nigeria.
On her part Titilayo Akinseye, Tax Manager, Tax & Treasury, Interswitch Limited providing her perspective on how the new tax regime has impacted business activities in the tech industry, said it has increased the cost of doing business, it will impact margins which will have adverse effects on the bottom line.
She said businesses like her company have adjusted to the tax regime change, beginning with the Value Added Tax. Titilayo said the tax laws need to be revamped to consider the current realities of taxing the digital economy.
The Interswitch Tax Manager believed a better understanding of the challenges and opportunities of the digital economy was vital for the tax authorities. She also suggested special tax provisions for digital service providers and tech companies.
She called on the government to provide pioneer status incentives for long-existing
Anthony Ezeamana Senior Associate, Detail Commercial Solicitors, also alluded to the point that clarity is needed for tax laws and provisions for the Digital economy.
He advised the Nigerian tech companies to study the amendments to the Finance Act 2019 and the tax provisions for the Digital Tech companies, and understudy the Company Income Tax, Value Added Tax, and Withholding Tax components as it affects their operations.
The lawyer also stressed the need for the next Finance Act to address the issue of the interpretation of tax provisions for Non-Resident Companies and companies with Significant Economic Presence, that operate under the Double Tax Tariffs.