CHALLENGES OF THE FINANCE ACT ON THE TAXATION OF DIGITAL ECONOMY IN NIGERIA

Abstract

The enactment of the Finance Act on 13 January 2020 introduced various changes to the principal tax laws in Nigeria, among which was the commencement of a new regime on taxation of digital services and products on persons and corporate bodies in Nigeria. Also brought under the new tax regime was the imposition of Value Added Tax (VAT) on intangible supplies and services. In that vein, the Finance Act 2020 had since its inauguration undergone several amendments. The growth in digital activities introduced a digital economy that has a solid potential of increasing the revenue of government vis-à-vis taxation in Nigeria. Foreign institutions seem to have populated the digital scene with the likes of Net Flex, Twitter, Appla, Amazon etc thus making a fortune from the country. There are challenges facing taxation of digital economy which include problem of identifying the income and profits of non-resident companies, lack of accurate data, lack of specialized court, among others, which have continued to pose serious threats to the new tax regime. Thus, providers of services/merchants seem to have been making so much out of the nation’s purse without any corresponding economic return. The aim of this paper is to examined the challenges torpedoing the taxation of digital economy, and also, advocated further amendments to the extant legal framework for taxation of digital economy as a way forward. This paper adopted doctrinal legal research methodology with the use of analytical approach. The paper used statutes and case law as primary sources and also made use of textbooks, journal articles, and Internet materials as secondary sources. At the end, the paper concluded that the extant legal framework for taxation of digital economy is shrouded with numerous legal challenges which are born out of the decreasing relevance of physical presence in the jurisdiction of consumers thereby destabilizing conventional tax regimes that are location based. The paper recommended among other things that the extant tax laws in respected of taxation of digital economy in Nigeria be amended to be in line with global best practices.