5% VAT Tax Sounds Like Sax, but is it a Vibe?

Executive Chairman of Nigeria’s Federal Inland Revenue Service (FIRS), Mr Tunde Fowler

Federal Inland Revenue Service (FIRS) is planning on broadening Nigeria’s tax base to extend to a 5% VAT on all local online transactions. It’s not just Nigerians, anyone would take a dive at any opportunity to forfeit paying tax.

Tax is like a saxophone; it’s difficult to master and play (and not many can) but the music it produces is melodious, and can literally take you to another level – something taxes do for countries.

International Monetary Fund (IMF) continues to pressure Nigeria to increase its tax rate which it says is one of the lowest in the world.

Given the fragile economic state of Nigeria however, it’s interesting to find out if taxes spreading to online transactions will be a vibe or jibe for the economy.

Would this kill the vibe?

VAT is a consumption tax, which is by choice, so if you can find an alternative to the service you need, then you are fine. For instance, you can pay for your Uber by cash rather than the extra 5% for a card payment.

This begins to defeat the cashless policy already and it opens up a Pandora’s Box that affects the economy at large.

In an already crunched economy, the mindset would be to save every possible 5% rather than give it away.

Online businesses/transactions that might suffer

Ecommerce platforms like Jumia and Konga immediately come to mind when you think of the impending VAT on online transactions. Nigeria’s ecommerce is still relatively young, the taxes might just discourage people from shopping online.

The fight to encourage online payments and reduce cash-on-delivery payments would suffer a hit as well. It’s a hit ecommerce firms will feel hard considering investments they’ve put into online payment platforms.

Fintechs like Carbon, Piggyvest, etc. promoting utility and other forms of bill payment will have to do more to convince their audience all over again.

Other popular services such as online airtime/data purchase, Uber and Taxify would be affected too.

Leadership is first among equals. It goes with humility.~Tony ElumeluTweet
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Briefcase Africa focuses on the African business landscape by highlighting opportunities for investments, connecting investors to relevant in-depth information, inspiring enlightening conversations about Africa’s rising narrative, and fostering economic success across the continent.

We represent a new paradigm on African business information publication and its consumption. We are actively changing the rhetoric and sharing the compelling stories of a business-ready Africa.

Never miss out!

Stay tuned with our weekly Briefs of articles worth reading

Copyright © 2018 ADE Digital Media Ltd

To Top

Sign up to Get Insights, Articles, Reports and Research on the African Business.

Take deep dive into understanding Africa’s game changing market indices and trends.

Make informed business decisions.
* we never share your e-mail with third parties.

Thank you

Share Briefcase Africa with your friends, they will thank you for it