APPRAISAL OF THE CHALLENGES FOR TAXATION OF DIGITAL ECONOMY IN NIGERIA

Abstract

Taxation is a compulsory levy imposed on a subject or upon his property by the government having authority over him. Taxation of digital economy is the imposition of monetary charge by a sovereign state on all economic transactions that occur on the Internet. So many Nigerians engage in digital activities on daily basis, a lot connect to digital sources of news and information on Google, Facebook, Twitter including those who trend online. There are lots of digital non-resident companies that engage in electronic transactions with persons resident in Nigeria like Amazon, Walmart, Alibaba Group Holding Ltd, Apple Inc, e Bay Inc, Starbucks, Macy’s, etc. and electronic payments are made through PayPal, Interswitch, Google Pay, Amazon Pay, WePay, Dwolla, Stripe, Braintree etc. There are challenges for taxation of digital economy in Nigeria which are problem of identifying non-resident companies, problem of identifying the income and profits of non-resident companies, problems of identifying the digital activities of these non-resident companies, lack of accurate data, lack of a specialized court, corruption, lack of IT experts, distribution of taxing powers between the source and resident jurisdiction, lack of effective tax enforcement mechanism, and lack of effective tax collection mechanism for vatable businesses in online transactions. Nigeria economy is dwindling every day as a result of over dependency on oil as the basic and only reliable source of revenue to the economy of government of Nigeria thereby making it imperative for government to fashion out ways of curbing the challenges of taxation of digital economy so as to achieve a tax-based economy in Nigeria. The aim of this research is to appraise the challenges for the taxation of digital economy in Nigeria. The authors adopted doctrinal research methodology with use of statutes, case law, textbooks, journal articles as well as internet materials. This paper concluded that taxation of digital economy will generate revenue for the Nigerian government and recommended inter alia the need for a clear-cut legislation for the provision of a digital services tax and need for a specialized court, need to create a synergy between the Federal Inland Revenue Service (FIRS), Corporate Affairs Commission and the banks and to ensure effective implementation of the proposed digital services tax legislation.