Executive Chairman of FIRS, Mr. Tunde Fowler, said yesterday at the African Tax Administration Forum (ATAF) Technical Workshop on VAT in Abuja that the agency would begin to impose VAT on local and international online transactions, with effect from January 2020.
Figures obtained from the Nigerian Interbank Settlement System (NIBSS), the total value of online transactions in the country between January and March 2019, was N27.649 trillion. A breakdown of this showed that transactions on NIBSS Settlement Series stood at N1.2 trillion within the period; e-payment operations – N24.2 trillion; Point of Sales – N633.8 billion; ATMs – N1.5 trillion; Mobile Money – N810.1 billion and Web-payment – N107.6 billion.
The Federal Inland Revenue Service (FIRS) may generate as much as N1.3 trillion in a quarter from Value Added Tax (VAT) on all online transactions, based on the projection of the levy being kept at the present five per cent base.
Therefore, should FIRS decide to fully implement this policy across all the payment channels, it would rake in N1.382 trillion in three months, being five per cent, the present VAT in the country, of the total amount within the period, as VAT.
Although Fowler did not give details of how much the agency was targeting, FIRS has been striving to boost revenue generation for the federation in the face of dwindling oil revenue, the major source of foreign exchange earning for Nigeria, and it is hoping to diversify the nation’s revenue base from this income stream.
FIRS officials contacted by THISDAY said since the modalities were being worked out, including what percentage of VAT to charge and whether the levy would be across all online platforms or not, it would be premature to discuss any projected earning for now.
However, at the ATAF workshop yesterday, Fowler spoke on the potential of VAT as a major income stream, saying that there is the need for Nigeria to fully exploit the possibilities to generate more revenue.
He said: “We have thrown it out to Nigerians. Effective from January 2020, we will ask banks to charge VAT on online transactions, both domestic and international.
“VAT remains the cash cow in most African countries, with an average VAT-to-total tax revenue rate of 31 per cent. This is higher than the Organisation for Economic Cooperation and Development’s average of 20 per cent.
“This statistics, therefore, is a validation of the need for us to streamline the administration of this tax with the full knowledge of its potential contributions to national budgets.
“It is, however, also bearing in mind the rights of our taxpayers.”
According to him, in Nigeria, for example, VAT is critical to the development of projects at all levels of government.
“VAT revenue is shared 15 per cent to the federal government, 50 per cent to state governments and 35 per cent to local governments.
“FIRS wrote to all commercial banks in May 2018, requesting for a list of companies, partnerships and enterprises with a banking turnover of N1 billion and above.