Google, Netflix, Facebook Pay N2.55trn Tax To Nigeria In 6 Months- Report

Google, Netflix, Facebook Pay N2.55trn Taxes To Nigeria In 6 Months- Report

3 weeks ago
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Foreign Companies Contribute N2.55tn in Taxes

Foreign companies such as Google, Netflix, and Facebook paid N2.55 trillion in taxes to Nigeria during the first half of 2024.

This amount marks a significant increase of 158.76% compared to N985.27 billion collected during the same period in 2023.

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The Federal Government’s revenue from these taxes has been attributed to a rise in digital service providers operating in Nigeria without a physical office.

Wale Edun, the Minister of Finance, commented, “This growth reflects the government’s commitment to expanding its tax base, particularly in the digital space. Our goal is to make tax collection more efficient without raising existing rates.”

Tax Categories: CIT and VAT Collection

The taxes paid include two main types: Company Income Tax (CIT) and Value Added Tax (VAT). According to the Federal Inland Revenue Service (FIRS), CIT is a 30% tax imposed on a company’s profit, while VAT is a 7.5% tax on goods and services consumed by Nigerians.

In January 2022, the Federal Government had introduced a 6% digital service tax for foreign digital service providers, a move aimed at capturing taxes from companies that have significant business in Nigeria but no physical presence. Companies such as Alibaba, Amazon, and Facebook fall under this tax policy.

An FIRS representative explained, “We saw a remarkable increase in tax compliance among foreign companies, particularly in the digital economy. Our data show that companies have started embracing the new digital tax structure.”

Digital Service Providers Now Liable to Pay Digital Tax

Foreign companies such as Netflix, Facebook, and Twitter, which provide digital services to Nigerian consumers, are expected to pay digital taxes to Nigeria’s Federal Inland Revenue Service (FIRS). These services include video streaming, advertising, and other digital content, all of which generate significant revenue.

Nigeria’s growing digital economy has made it crucial to implement tax policies for companies that offer services to Nigerian consumers but do not have physical offices in the country. The tax collection has also benefited from the Finance Act of 2021, which clarified the tax obligations for these digital companies.

READ ALSO: Nigerian Govt’s Suspension Of Taxes On Food Imports Will Stabilise Prices – NACCIMA

A breakdown of the tax payments reveals that N1.72 trillion was collected as CIT, while N831.47 billion was collected as VAT between January and June 2024. In the second quarter, CIT increased by 87.2% from N598.13 billion in Q1 to N1.12 trillion in Q2, marking the highest contribution by foreign companies to date.

Foreign Companies Leading in Tax Payments

Wale Edun also emphasised that foreign companies contributed more than 45.3% of the total tax collected in the second quarter of 2024. “These figures show how crucial foreign companies, especially in the tech and digital sectors, are to our tax base. Their contributions make up a significant portion of our revenue,” he noted.

Companies like Alibaba and Amazon, which offer goods and services through digital platforms, have been key players in the growth of Nigeria’s tax revenue. These companies generate revenue from Nigerian consumers by processing data, offering services, and linking suppliers and customers through digital platforms.

Tax Revenue Growth Without Increased Rates

Interestingly, Nigeria has achieved this increase in tax revenue without raising tax rates. The government’s strategy has focused on widening the tax net, particularly targeting sectors like the digital economy, which had previously gone untaxed. The tax rate remains at 30% for corporate profits and 7.5% for VAT, yet the revenue from these taxes has more than doubled.

On Tuesday, Edun said, “We have managed to grow our revenue base to N9.1 trillion in the first quarter of 2024 without increasing the tax rates. Our focus is on efficient collection and ensuring that every sector, including the digital economy, contributes its fair share.”

The Federal Government plans to continue tightening its tax policies, especially for digital companies, to maintain this upward trend in tax revenue without burdening existing taxpayers.

This focus on improving tax collection, especially from digital service providers, highlights Nigeria’s evolving approach to taxation in the digital age. As the global economy shifts towards online services, Nigeria aims to ensure that foreign companies benefiting from Nigerian consumers contribute to the nation’s tax revenue.

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Emmanuel Ochayi is a journalist. He is a graduate of the University of Lagos, School of first choice and the nations pride. Emmanuel is keen on exploring writing angles in different areas, including Business, climate change, politics, Education, and others.

Emmanuel Ochayi is a journalist. He is a graduate of the University of Lagos, School of first choice and the nations pride. Emmanuel is keen on exploring writing angles in different areas, including Business, climate change, politics, Education, and others.

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