E-commerce taxation: a framework to broaden the tax base in Nigeria

E-commerce taxation: a framework to broaden the tax base in Nigeria

The world is experiencing remarkable advancements in technology that has given pace to the emergence of e-commerce, creating a system where transactions are carried out via computer networks (online). Tax Authorities have been challenged with the emergence of e-commerce, owing to the fact that Tax laws were initially designed to consider only physical transactions. E-commerce is growing fast in Nigeria; an economy that is heavily dependent on Oil and desperate for diversification. 
 
This research seeks to address the challenges e-commerce poses to Value Added Tax (VAT) in Nigeria, with a domestic focus on tracking e-commerce transactions for VAT purposes and the challenges of cross-border trade on e-commerce VAT. The methodology applied in this study is based on local investigations, focusing on stakeholder role and participation to address the domestic VAT on e-commerce and drawing lessons from the OECD1 action plan on the digital economy with additional reference to South Africa in addressing the challenges of cross-border VAT. The paper argues for a destination principle in mitigating the challenges VAT poses to cross border trade together with an international collaboration between Nigeria and other economies. In addressing the issue of domestic VAT on e-commerce, the paper recommends a multi-stakeholder approach between local agencies to bring about sound policies and effective administrative measures.