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Federal Govt Moves To Tax Facebook, Twitter, Ors

Federal Govt Moves To Tax Facebook, Twitter, Ors

Vice President Yemi Osinbajo has said the federal government is set to utilise legal provisions to collect taxes on profits made by foreign global technology and digital firms with a significant economic presence in Nigeria.

Osinbajo gave the hint while interacting with a delegation of the Chartered Institute of Taxation of Nigeria (CITN) led by its president, Mr. Adesina Adedayo, at the Presidential Villa on Friday.

According to him, while the federal government will not be raising tax rates at this time based on the Finance Act of 2019, it is already empowered to widen the tax net, which includes collecting taxes on the Nigerian income of global tech giants with a significant economic presence here. He added that this is despite the fact that the firms have not established an office or permanent establishment and are currently not paying taxes in Nigeria.

A statement by Osinbajo’s media aide, Laolu Akande, added that the vice president referred to Section 4 of the Finance Act 2019, provides that “the Minister (Finance) may by order (of the President) determine what constitutes the significant economic presence of a company other than a Nigerian company.”

According to Osinbajo, “we have had severe economic downturns which of course implies that we may not be able to collect taxes with the aggressiveness that would ordinarily be expected.  “I think the most important thing is that we must widen our tax net so that more people who are eligible to pay tax are paying. Several efforts have been made, and I am sure you are aware of the initiatives including the Voluntary Assets and Income Declaration Scheme (VAIDS) which was also an attempt to bring more people into the tax net, including those who have foreign assets.”

Continuing, the vice president said “we have also recently taken a step with respect to a lot of the technology companies that are not represented here but who do huge volumes of business here. “The Finance Act has shown that we are very prepared to ensure that these big technology companies do not escape without paying their fair share of taxation in Nigeria. Many of them do incredible volumes here in Nigeria and in several other parts of the region.

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“We have drawn up the regulations and we are prepared to go, and I think that we are at least in a good place to tap into some of the tax resources we can get from some of these companies.”

Indeed, besides the federal government, a recent Bloomberg news article reported that “Governments around the world are grappling with how to modernise their legal frameworks to account for the global reach of the digital economy, reshaping how policymakers think about issues as varied as monopoly power, taxation and workers’ rights. “Also, international talks are currently ongoing in Paris on global standard rules for governments to receive taxes from such digital and technology firms with a significant economic presence in foreign countries.

“In Nigeria, according to the Finance Act 2019, a company will pay taxes if it “transmits, emits or receives signals, sounds, messages, images or data of any kind by cable, radio, electromagnetic systems, or any other electronic or wireless apparatus to Nigeria in respect of any activity, including electronic commerce, application store, high-frequency trading, electronic data storage, online adverts, participative network platform, online payments and so on, to the extent that the company has a significant economic presence in Nigeria and profit can be attributable to such activity.

“If the trade or business comprises the furnishing of technical, management, consultancy or professional services outside of Nigeria to a person resident in Nigeria to the extent that the company has a significant economic presence in Nigeria”

Osinbajo said while the federal government has no plans to raise taxes now, he noted that there are those who argue that Nigeria’s tax rates are too low when compared to other places in the region where the rates are much higher.

“So, we have had to balance all of these issues because clearly, higher tax rates can be a disincentive to businesses and investments. In terms of domestic resource mobilization, we are trying to do the best we can give the present circumstances and I believe that there is room for improvement.”

Actually, under the Finance Act 2019, the Buhari administration has reduced taxes for small companies – companies with less than N25 million in annual turnover are charged Zero Company Income Tax, CIT. Also, CIT for Companies with revenues between N25 and N100million (described in the Act as “medium-sized” companies) has been reduced from 30 per cent to 20 per cent. Besides, Nigerians making minimum wage income are not to pay tax at all.

Under the 2020 Finance Act there is also an exemption of small companies from payment of education tax under the Tertiary Education Trust fund (TETFUND)-meaning companies with less than N25m turnover are eligible

Similarly, there is a 50 per cent reduction in minimum tax; from 0.5 per cent to 0.25 per cent for gross turnover for financial years ending between January 1st, 2020 and December 31st, 2021

Welcoming the delegation, the vice president emphasised the need for regular interaction between the council and government to address issues bothering on tax legislation, noting that “there is need for continuous engagement with the National Assembly because engagement with the government cannot be a one-off thing.”

Earlier in his remarks, the President of CITN, Mr. Adesina Adedayo, commended the leadership of the Vice President in the implementation of key government interventions in the economy, stating that “we acknowledge your great zeal and commitment to Nigeria project.”

He said the visit became necessary given the enormous work the Buhari administration has done towards addressing the huge fiscal challenges in the polity, public financing reforms, and sustained efforts towards addressing infrastructural deficit across the country.


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