The Nigerian Minister of State for Budget and National Planning, Prince Clem Ikanade Agba, says digital economy, which is high on the list of untapped sources of funds for the Nigerian tax authorities, is the future of the nation.
Agba stated this at the 2022 edition of the Punuka annual lecture, with the theme: Taxation of the Digital Economy: The Challenges and Prospect for Nigerian Economy.”
Agba however said, a delicate balance must be achieved such that taxation of the digital economy did not stifle its growth.
He noted that taxes were the lifeblood of government.
According to him: “It is the blood with which the economy runs and functions, and without it, a government will not be able to fulfil its obligations to the citizenry.
“Whatever affects collectible taxes will therefore affect the health, existence and performance of the government and the economy.”
He explained that the digitalisation of the economy had revealed some challenges and shortcomings in the existing tax practice as it affects the allocation of taxing rights and administration of taxes, especially with respect to non-resident taxpayers.
He said Nigeria so far, had sought to tackle these issues through a three-pronged approach that consisted of strategic changes to tax policy, administration and the legislative framework they are hinged on.
“It is therefore expected that there will be changes associated with taxation of incomes arising from cross-border transactions especially with regards to tracking, tracing, assessment, and collection of taxes,” he stated.
The minister asserted that the economic slowdown caused by the Covid-19 pandemic significantly eroded tax revenues in the country and forced the Federal Revenue Services (FIRS) to seek alternative sources of taxation.
“The pandemic created the opportunity for many businesses and other entities to adjust to utilising unconventional digital means for education, banking, conferencing, meetings and the sale of goods.
“The growth in the digital economy therefore provides an opportunity for the government to increase its revenue collection and expand the tax base, which is particularly important for our country with a large informal economy and a very limited tax base,” he added.
He emphasised that given revenue generation which is relatively low compared to the huge responsibilities of the government, concerted efforts were required to prioritize government expenditure and place emphasis on resource mobilization, adding that taxation of the digital economy was one of such options as it was expected to raise government revenue profile by about 15 percent of our GDP by 2025.
“The federal government has also put in place the Strategic Revenue Growth Initiative (SRGI) and the annual Finance Act to mobilize domestic funds necessary for human capital and infrastructure development that are both drivers and enablers of sustainable economic growth and development.”
He said the lecture theme was apt as efficient taxation of the digital economy had become a crucial consideration for tax authorities across the globe.
