Minister of State for Budget and National Planning, Prince Clem Ikanade Agba says that the digital economy was the future of the nation. Agba said digital economy was high on the list of untapped sources of funds for the nation’s tax authorities. 

He stated this at the 2022 edition of the Punuka annual lecture, with the theme: “Taxation of the Digital Economy: The Challenges and Prospects for the Nigerian Economy.

“Let me appreciate the organisers of this event especially the Senior Partner of Punuka, Chief Anthony Idigbe (SAN) and the Managing Partner, Chief (Mrs) Elizabeth Idigbe and indeed the entire staff and members of PUNUKA Attorneys & Solicitors for the serious levels of engagement at your annual event. 

“I am convinced that  the outcome of the deliberations will contribute tremendously to the body of knowledge in the subject area which will be useful to policy makers in the tax administration system in Nigeria.

“He noted that taxes were the lifeblood of the 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 affected 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 a known fact and welcome development that technological advancements, globalisation and digitalisation have enabled exponential growth and evolution in trade and businesses. It has however, also brought about changes in business models and behaviour, especially that of multinational enterprises (MNE). 

“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.

Going down memory lane, the minister asserted that the economic slowdown occasioned 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.

According to  him, “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. 

“Flowing from the above, it is therefore apparent that the digital economy is high on the list of untapped sources of funds for our tax authorities. However, a delicate balance must be achieved such that taxation of the digital economy does not stifle its growth. 

“This lecture therefore serves as a platform for deliberation on how best we can protect our interests as a country, protect our tax base, as well as, ensure revenue assurance for our government in a digitalised age, and explore further revenue opportunities for our country as a productive way forward for our economy.

“To achieve these, President Muhammadu Buhari launched the approved National Development Plan 2021 – 2025 to guide Government’s policies, programmes and projects as well as private sector operations while these would be inspired by the perspective plan tagged Nigeria Agenda 2050 which encapsulates our long-term vision for Nigeria plan is a blue print designed to guide the implementation of government’s policies and programmes and deliver on the aspirations of the current administration.

“The Vision of the plan is to make Nigeria a country that has unlocked its potentials in all sectors of the economy for a Sustainable, Holistic and Inclusive National Development.  Some of the specific targets of the Plan are: to improve GDP growth to 5.0 percent on the average during the Plan period; generate 25 million jobs; lift at least 35 million Nigerians out of poverty; and raise Government revenue to 15 percent of GDP by 2025, among others.

“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 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. 

“The SRGI is designed to improve government revenue and entrench fiscal prudence with emphasis on achieving value for money. A total of 47 Strategic Revenue Growth Initiatives were identified across three Thematic areas to achieve sustainability in revenue generation, identify new revenue streams and enhance the enforcement of existing ones as well as achieve cohesion in the revenue ecosystem.

“Accordingly, Nigeria has taken major strides in providing responses to the challenges posed by the digital economy to both direct and indirect taxes. The immediate policy focus of Nigeria was to provide in-house solutions to the tax challenges posed by the digitalisation of the economy, while working with international bodies to achieve a consensus based multilateral solution.

“The in-house solutions, in the form of the Significant Economic Presence rules introduced to tackle the nexus issues in corporate income taxation, as well as the Simplified Registration and Compliance Regime introduced to collect VAT on digital supply of services and intangibles, are all yielding appreciable positive result. “This is more noticeable with the fact that FIRS has been contributing substantial parts of revenue shared from the Federation Account in recent months.

“Despite Nigeria’s feat in this respect, we are not unaware of other challenges that uncoordinated unilateral action can cause to the global tax system, especially with regards to double taxation and its impact on trade and investment.  “As such, Nigeria participates actively in the global discourse around tax issues arising from the digital economy under different fora, importantly at the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting; the UN Committee of Tax Experts and the African Tax Administration Forum (ATAF).

“Our participation in these fora is predicated on the dual objective of being proactive in the exploration of a sustainable consensus-based solution, as well as an alternative solution in the event that no consensus is reached. Under the OECD/G20 Inclusive Framework, the basis of our involvement was the understanding that a coordinated, universal solution to the tax challenges of the digitalised economy is necessary but must be fair and acceptable for all members.

“However, the prevailing realities, supported by negative revenue results from internally conducted economic impact assessments, has raised the question of fairness of the multilateral approach by the OECD/IF, necessitating our re-evaluation of our expectations of the project outcomes. 

“This explains why our country abstained from endorsing the political statement on the two pillared approach addressing the tax challenges of the digitalised economy, which was put out by the IF in October 2021.”In the light of this, we must commend the efforts taken so far by all key stakeholders in adapting our tax system in a digitalised era.

Digitalisation of the economy does not only bring with it tax challenges but also opportunities that we must seize. “It has therefore become imperative, more so now, that we prioritise securing Nigeria’s tax base by intensifying efforts in blocking tax leakages and ensuring transparency, while also working towards securing a fair deal that provides for equitable global re-allocation of profits to all market jurisdictions on the international front. 

“This is the expectation for all of us, whether as a policy maker, tax administrator, tax consultant, professional body or taxpayer. We must unite in exploring a solution that works for the benefit of our dear country. This should be the focus of the deliberations at this meeting today,” he stated.

He said tracking service delivery and development in communities was the responsibility of all, adding in order to ensure transparency and accountability in the delivery of government’s capital projects countrywide, the Budget and National Planning arm of the Ministry had been working on a Web Application called Eyemark which will assist citizens to “eye mark” and report on government’s projects and programmes “earmarked” for their communities using their mobile phones and laptops in “real time.”

He explained that the  Eyemark App was currently in beta and can be accessed by all via the URL www.eyemark.ng.

He said,  “The Eyemark App allows users to view and explore projects without registing but would require user registration to review and follow projects. “With the full launch of the App in the coming weeks, the government requires your active participation in the process of tying budget provisions to projects and getting time value of money earmarked for capital projects, as ‘governance is a collective responsibility by all citizens.” 

He submitted that “the greatness of a nation lies in how passionate and committed its citizens in achieving set goals. “In view of the foregoing, I urge all delegates to remain focused and be mindful that the ultimate goal of this event is having progressive deliberations, and formulating ideas that will contribute to good governance and the development of our country.”