Nigeria Opts Out from Signing Global Tax Deal on Multinationals Endorsed by 130 Countries

Nigeria has opted out from signing a 15% global tax deal to be imposed on multinationals.

According to media reports the tax deal was signed by about 130 countries in the world.

The deal was proposed by US President, Joe Biden and backed by the world’s leading economies. Specifically, it will see a global minimum corporate tax rate of 15% levied on multinationals.

Further, the deal, a landmark development led by the Organisation for Economic Co-operation and Development (OECD), is widely believed to be one that would ensure sustainable tax revenue for developing countries where global tech giants have customers.

The negotiations for the global tax deal were held in Paris, France. In summary, the deal is targeted at big tech companies who often exploit tax loopholes and tax havens to avoid paying taxes. The pact, which is estimated to generate about $100 billion in taxes annually, is set to be finalised in October. Thereafter, it will come into effect in 2023.

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Nigeria is home to a number of multinationals operating in various spheres; including tech, manufacturing, FMCG and other business verticals.

However, Nigeria had abstained from signing the deal, despite the Federal Government publicly exploring increased taxation; while also capturing more Nigerians in the tax net as a means of generating more revenue to bulk up a flailing economy;  which is otherwise heavily dependent on crude oil revenue.

Nigeria was among eight other countries that opted out from endorsing the deal.

The others are Ireland, Estonia, Hungary, Barbados, St Vincent and Grenadines, Sri Lanka and Kenya. Equally important, Kenya and Nigeria are the only two African countries who abstained from signing the deal.

No reason has been adduced for the refusal of the Federal Government to endorse the deal. Further, the Ministry of Finance is yet to comment on the development.

In a statement released on Thursday, July 1, 2021, the OECD stated that multinationals should offer 20-30% of their profits in excess of a 10% margin for taxation in countries where they have customers. Also, such markets will be determined by a threshold. The multinationals should be deriving at least 1 million euros in revenue from that market. For smaller jurisdictions with GDP lower than 40 billion euros, the nexus will be set at 250,000 euros, the OECD stated.