FIRS Starts VAT Charge on Online Transactions in January 2020 – Fowler

Ronke Kehinde/

The Federal Inland Revenue Service (FIRS) says it will begin to impose Value Added Tax (VAT) on online transactions, both domestic and international, with effective from January 2020.

The Executive Chairman of FIRS, Mr Babatunde Fowler, disclosed this at the African Tax Administration Forum (ATAF) Technical Workshop on VAT on today in Abuja.

Fowler said that a lot of countries in the world had identified Nigeria as a good market and many of them were into online businesses, adding that there was the need to tap the potentials to generate more revenue for the country.

He, however, said that the date of commencement of the VAT on online transactions would be subject to government’s approval.

“We have thrown it out to Nigerians. Effective from January 2020, we will ask banks to charge VAT on online transactions, both domestic and international.

“VAT remains the cash cow in most African countries, with an average VAT-to-total tax revenue rate of 31 per cent. This is higher than the Organisation for Economic Cooperation and Development’s average of 20 per cent.

“This statistics, therefore, is a validation of the need for us to streamline the administration of this tax with the full knowledge of its potential contributions to national budgets.

“It is, however, also bearing in mind the rights of our taxpayers,” he said.

According to him, in Nigeria, for example, VAT is critical to the development of projects at all levels of government.

“VAT revenue is shared 15 per cent to the Federal Government, 50 per cent to state governments and 35 per cent to local governments.

“FIRS wrote to all commercial banks in May 2018, requesting for a list of companies, partnerships and enterprises with a banking turnover of N1 billion and above.

“This activity is aimed at ascertaining those companies that are compliant with the tax laws and those that are not,” he said.

Fowler, who is also the chairman of ATAF, said that the African tax outlook gave some starting points on the questions to ask regarding some aspects of VAT.

He said, “Why does VAT contribute 51 per cent to total tax revenue in Senegal but only 17 per cent in Nigeria? Why is the ratio on VAT refunds at 49 per cent in Zambia but only one per cent in The Gambia?”

Fowler charged participants at the workshop to find answers to the questions and address the gaps in some countries to improve VAT collection.

The Executive Secretary of ATAF, Mr Logan Wort, said that the establishment of the ATAF VAT Technical Committee in 2017 had given rise to various debates aimed at giving better policy options for countries.

Wort explained that this would enable member-states to share ideas and techniques on how best to administer, design and audit VAT.

He said that the establishment of the committee was a way of practically addressing some issues that were becoming common phenomena across the continent.

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