Value Added Tax Imposition On Online Transactions

In Morning Crossfire 2019-08-28 10:41:37
Value Added Tax Imposition On Online Transactions
Value Added Tax Imposition On Online Transactions

Tunji Andrews on the Morning Crossfire shares light on the issue and expounds it, offering his wealth of information on the online tax to be imposed by government will work and how it’s going to affect Nigerians. He teams up with Sheriff Quadri who anchors the show this morning.


Tunji begins by explaining what VAT is. “VAT is Value Added Tax which government makes use of to acknowledge the improvement in products. There’s a value attached to every development of a product on certain stages. It is believed that government has been able to create an enabling environment for each business to add value.


“For example, if I sell cashew and I take it from the farm I should be able to put VAT. Also, if there is a packaging or a putting of it together, there should also be a VAT on that too. Basically, VAT is a government tax on goods and services and it has to be paid by the consumers.


What justifies a government to put up VAT on any commodity? Tunji reiterates that yes, government has put in place a conducive environment for business people to make money. But for those businesses that go extra mile of providing amenities such as good roads, and other enabling environment, they deserve a tax cut, according to Tunji.


Revealing what he thinks about VAT and the recent proclamation of government requesting VAT from online transactions, Tunji says he understands where they’re coming from. “This is a time when Nigeria has been squeezed of much revenue. So we’re looking everywhere that we can possibly find money. We have looked around and still looking for the volumes, asking banks what’s moving the money and where is it going to? But there’s a big chunk of money moving in and out of online transactions.


“Government is probably looking at the fact that they created an enabling environment for these transactions. But the modeling of e-commerce businesses is not efficient. The seller has already put a VAT on the consumer. So since the banks where payments are made take VAT, it means we are paying a third VAT on the same goods.”


The other problem with online commerce in Nigeria is that there is the issue of trust. Most buyers believe that they don’t get exactly what they pay for. In the other way around, when a good paid for is delivered, sometimes, the buyers reject the goods and such goods have to be returned, there by incurring more transportation costs. The producer simply transfers the cost of tax over to the buyer.


Government has not revealed exactly what they mean by ‘online transactions’ as there are other online payment models that are not on goods paid for online. Of course, sending money to someone else also incurs VAT charge. School fees, rents, and other things all attract VAT.


On  Monday 26th,  the chairman of Federal Inland Revenue Service - Tunde Fowler, disclosed that the FIRS will impose a #VAT on "Domestic And International Transactions Done Online" come 2020.


In sharing the revenue derived from VAT to the three tiers of government, the Federal Government through its Revenue Allocation Commission applies the following sharing formula:


Federal Government   15%


State Governments & FCT Abuja 50%


Local Governments   35%


What kinds of online transactions will this new taxation policy affect?


Will this mean that people who make online cash deposits and withdrawals have to pay the #VAT as well?


Watch the program below




 - Financial, Economic, and Policy Expert/Analyst)



#MorningCrossfire with @SheriffQuadry


Written by Jude Chukwuemeka