Nigeria may debut 5% VAT charge for online trades in 2020


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The Federal Inland Revenue Service (FIRS) may, from next year, ask banks to charge customers five per cent Value Added Tax for online purchases when using bank cards, its Chairman, Tunde Fowler, has said.

 

Mr Fowler, who gave the hint in an exclusive interview with PREMIUM TIMES in his office in Abuja, also said the federal government was yet to take a decision on whether to increase VAT or not.

 

Online purchases are increasingly becoming popular among Nigerians with online stores such as Jumia and Konga leading the pack. Many Nigerians also buy from popular Chinese online store, Aliexpress.

 

Payments for such purchases are often made using bank debit and credit cards, and could soon attract the five per cent tax being considered by the FIRS.

 

Although he acknowledged Nigeria was not fully ready for the growing global digitalised economy, the FIRS Chairman said, based on existing laws, the country will adopt a solution suitable to her peculiar circumstance.

 

“We will address the issue of the digitalised economy very soon. There is no global solution to a digitalised economy.

 

“Different countries have taken different solutions to address the problem. Nigeria has not taken a position yet. But, we are meeting to see if we can come up with a global solution that we can all adapt to.

 

“With the existing laws in Nigeria, we can appoint the banks as agents. First of all, all those who make payments for purchases online using bank cards and instruct their bankers to pay, we will tell the banks that, going forward, everyone who gives instructions for service for purchase online, they should deduct five per cent VAT,” he said.

 

“We are thinking that maybe early next year, we will advise banks to start deducting five percent VAT for all online purchases done locally,” he added.

Also, the FIRS Chairman spoke on the lingering debate on an increase in the VAT rate from the current five per cent to either 7.5 per cent or 10 per cent.

 

According to Mr Fowler, given a choice between increasing VAT rate and expanding the tax base, he will prefer the latter.

 

“Of course, the first one will be the expansion of the tax base. The tax has to be fair. That’s where we started off. That’s why we have said we have redesigned and issued new tax certificates for VAT.

 

“We have given to all registered taxpayers. We believe we should have effectively at least 1.5 million corporate taxpayers,” he said.

 

Despite pressures from the International Monetary Fund (IMF) on the need to increase VAT rate in Nigeria, the FIRS chief said the Federal Government is yet to make any official pronouncement on the issue.

 

“The IMF said Nigeria’s VAT rate is one of the lowest in the world. We had discussions back and forth on the benefits of the increase. My position is to first expand the tax net.

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