AN APPRAISAL OF NIGERIA’S APPROACH TO TAXATION OF DIGITAL ECONOMY: A LEGAL PERSPECTIVE OF THE POLICY OF PHYSICAL PRESENCE OF THE TAX PAYER

Abstract

The digitalized economy has created a big challenge for taxation as there are no robust local laws enough to address the complexities created in digital economy. Digital taxation simply put is the tax policy put in place by various countries designed to be levied on digital transactions like Facebook, Youtube and others, wherein the companies may not have physical presence in their country. Today’s digital companies are fast changing the economic landscape with companies like Apple declaring its revenue in 2021 at 118 billion dollars, yet the tax paid are very little or not paid at all. Due to this, countries are assessing the amount of money to be from their country and the amount to be paid as taxes to the countries where these digital companies are generating their revenue. Formerly, the rules of taxing multinational companies in Nigeria have been largely dependent on whether there is a physical presence or permanent establishment in a country, as residence of a tax payer determines his tax liability, in other words, residency and source are the basis for the collection of tax. This work examines Nigeria’s approach to Taxation of Digital Economy with innovation in modern business transactions with the existing laws vis-à-vis the collection of digital tax. The work x-rayed the digital tax laws and policies of other jurisdictions like USA and South Africa with a view to extracting some of the relevant policies that can suit Nigeria tax regime. The methodology that was adopted in this work was doctrinal method of research, using analytical and narrative approach in reviewing the tax laws, statutes, case laws, legal opinions of experts in textbook and articles relevant to the subject matter of digital taxation. The work recommended amendment to the current tax laws to address the problems that had plagued the tax system for clarity of the provisions to taxpayers and tax administrators as well as the difficulties of inroad into the digital economy in order to expedite these mechanisms in use. The work further recommends that Nigeria should formulate more direct and confronting laws that will empower the relevant Nigeria tax authorities to administer the assessment, remittance and collection of various taxes on digital space and as well present itself to participate in global discussions like OECD meetings, geared towards the development of the BEPS and its application. This is to ensure that peculiarities of the Nation are considered in the formation of such plans.