Tayo Busayo, Abuja
DAILY COURIER - Foreign tech companies, including Google, Facebook, and Netflix in a significant boost to Nigeria’s revenue contributed N2.55 trillion in taxes to the Federal Government in the first six months of 2024. This figure represents a massive 158.76% increase from the N985.27 billion collected during the same period in 2023, according to data released by the National Bureau of Statistics (NBS) and the Federal Inland Revenue Service (FIRS).
The surge in tax payments comes from both Company Income Tax (CIT) and Value Added Tax (VAT), collected from international digital service providers operating within Nigeria. CIT, which imposes a 30% tax on the profit of companies, and VAT, a 7.5% consumption tax, were the primary contributors to the revenue spike.
This leap in tax collection follows the Nigerian government’s 2020 decision to begin taxing foreign digital platforms providing services in Nigeria and generating revenue in naira. Companies such as Google, Facebook, Netflix, and others that offer digital advertising, video streaming, and downloadable content, are required to pay taxes even though many of them do not have physical offices in the country.
Companies like Alibaba and Amazon, which earn revenue by processing data from Nigerian users or offering digital services through intermediaries, also contributed significantly to the tax pool. These firms provide goods or services directly or link suppliers and consumers through digital platforms, making them subject to Nigeria’s digital taxation laws.
The tax breakdown showed that N1.72 trillion was collected as CIT, while N831.47 billion was from VAT between January and June 2024. Notably, the second quarter saw a sharp increase in CIT collections, rising by 87.2% from N598.13 billion in the first quarter to N1.12 trillion in the second quarter. However, VAT receipts slightly decreased from N435.73 billion in the first quarter to N395.74 billion in the second quarter, reflecting a reduction of N39.99 billion.
The government's focus on taxing foreign digital companies has been crucial in its efforts to increase revenue without imposing additional taxes on domestic businesses. In January 2022, under the provisions of the 2021 Finance Act, the Nigerian government introduced a 6% tax on the turnover of offshore companies offering digital services to local customers, further reinforcing the tax framework for foreign digital entities operating in Nigeria.
On September 10, 2024, Wale Edun, Nigeria's Minister for Finance and Coordinating Minister of the Economy, highlighted the positive revenue performance, noting that the Federal Government had recorded N9.1 trillion in revenue in the first quarter of 2024. This amount more than doubled the revenue figure for the same period in 2023, achieved without increasing domestic taxes.
The tax contributions of these foreign tech companies have significantly bolstered Nigeria's fiscal standing, reflecting the growing importance of digital service providers in the country's tax landscape. The government’s strategic decision to extend its tax net to international companies operating digitally has allowed Nigeria to tap into a previously underutilized revenue stream, helping to mitigate economic challenges and reduce the pressure on traditional sectors of the economy.
As Nigeria continues to expand its digital economy and strengthen its tax collection mechanisms, the contributions from global tech giants like Google, Facebook, and Netflix are expected to grow, further supporting the country’s development goals.
