Nigerians has taken to their social media pages to express their dissatisfaction on the proposed 5% Value Added Tax (VAT) set to be introduced by Federal Inland Revenue Service (FIRS) on every online transactions in 2020.
This was as a result of the announcement made by FIRS Executive Chairman, Babatunde Fowler in an interview with a media house in Abuja and also with News Agency of Nigeria earlier in New York.
According to the Executive Chairman, the Federal Inland Revenue Service will soon begin the collection of 5% Value Added Tax on all online transactions.
He earlier explained that the move was part of measures by FIRS to meet its N8 trillion revenue target for 2019, but now might be effective starting year 2020.
Mr Fowler, who gave the hint also said the federal government is yet to take a decision on whether to increase VAT or not.
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.
“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.
Fowler said, “Maybe next year, we will ask banks to impose VAT on online transactions for purchases of goods and services done locally.
“Not that it is something new; it actually should be in existence.
“We will certainly follow up to make sure that every VAT that is due to be collected is collected.”
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.
Reports has it that, the cashless policy has resulted in increasing demand for ATM services deployed in major cities and commercial centers across Nigeria, such as Lagos, Port Harcourt, Enugu, Onitsha, Ibadan, Kaduna, Kano, and Calabar, to facilitate electronic banking and financial services.
The demand for electronic transactions has also attracted payment facilitators from Europe and Asia who are now investing in Nigerian electronic infrastructure projects.
It is to be noted that online commerce and financial technology in Nigeria is strengthened by the fast growing youth populations, expanding consumer power, and increased smartphone penetration.
Also, the current e-commerce spending in Nigeria is estimated at $12 billion, and is projected to reach $75 billion in revenues per annum by 2025 (McKinsey). While a report by London based Economist Intelligence Unit (EIU) places Nigeria e commerce worth at $13 billion.
Notwithstanding all of the challenges, a number of reports equally estimate that the Nigerian e-commerce industry to be valued at between $16bn to $17bn with a lot of potential for growth, if some of these challenges are tackled.
In addition, experts in the Nigerian financial service sector have also estimated that Nigeria’s e~commerce market value could rise to $50 billion (N15.45trillion) over the next 10 years.
Recently, the National Bureau of Statistics (NBS) predicted that the e-commerce sector is expected to contribute about 10 per cent, of a projected N10trillion, to the nation’s Gross Domestic Product (GDP).
Unfortunately, FIRS’ proposition did not go down well with Nigerians as they expressed their heartfelt discontent on the move.
According to them, if the 5% VAT on online transactions come to be, they would opt for alternatives.
Reacting to this on twitter, Bill Gates’ Maiguard said “FIRS is going to start taxing every online transaction by 5% from next year? This is what happens when policy is made with knee jerk reactions.
“This is bad. First the environment is not business friendly, and now you cannot even invest your own hard earned money on online saving platforms in peace. What is this?”
Another named Adebayo A.B noted that “the policy is at best unreasonable. They want to implement VAT in the sector where the government had little or no positive market impact.
“This will damage our cashless policy. We’re going back to the 2010”.
With an hash tag #KillCashlessBanking, Ifeanyi Ezenandu said “I will rather pay in cash for all my transitions”.
@Alaba Oginni said,“And that’s how they’re going to suffocate online banking…I don’t know how you’ll be promoting that people should migrate to online banking on one hand and be taxing it with the other…back to the bank queues and cash it is then”.
More so, Emmanuel D Ekpenyong asked “Shouldn’t FIRS engage key stakeholders in the sector before rolling out the taxes? What is the rationale behind the new tax?
Among many others, Eniowo @EniSensei posited that “there is no rationale. They see and hear the relatively huge transactional footprint generated by an infant fintech subsector and don’t like been on the sidelines of how that ecosystem operates…
…so FIRS in usual fashion steps in to bully an entire sector”.