It is official. The Federal government earnings increased in the last fifteen months courtesy of N1.98trn taxes paid by Google, Netflix, Facebook and other foreign companies operating in Nigeria .
The figure includes both Company Income Tax and Value Added Tax, and is based on data from the National Bureau of Statistics.
According to the Federal Inland Revenue Service, CIT is a 30 per cent tax imposed on the profit of companies, and VAT is a 7.5 per cent consumption tax paid when goods are purchased, and services rendered and borne by the final consumer.
Earlier in 2020, it was reported that the Federal Government planned to tax foreign digital service providers offering services to Nigerians and earning revenue in naira.
Some of these service providers, which are video streaming sites, social media platforms, and companies that offer downloads of digital content are expected to pay digital tax to the Federal Inland Revenue Service.
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The former Minister of Finance, Zainab Ahmed, had issued the Companies Income Tax (Significant Economic Presence) Order, 2020 as an amendment of the Finance Act 2019.
The order aimed to impose a tax on a foreign entity with respect to certain services or digital transactions if it had a Significant Economic Presence in Nigeria.
She noted that in line with Section 4 of the Finance Act, non-resident companies are now expected to pay tax at six per cent on their turnover.
The minister, who stated that the government was desirous of modernising taxes for its digital economy and to improve compliance, noted that digital non-resident companies do not need to be registered locally but would have an arrangement with the FIRS to collect and remit taxes in a bid to reduce the compliance burden.
Analysts at PricewaterhouseCoopers had said earlier that some of the affected foreign digital companies would be required to register for income taxes in Nigeria and file annual tax returns even if they did not have a physical presence in Nigeria.
They added that Nigerian resident businesses (as well as the fixed bases of non-resident companies) that have transactions with the affected non-resident companies would also be required to account for withholding tax on some of the payments made to these foreign companies.
PwC raised concerns as to how the FIRS would enforce compliance without international consensus, as a number of the companies affected might be outside the territorial reach of the agency.
According to the consulting firm, the problem will also be exacerbated where the companies sell their products and services directly to individual consumers in Nigeria.
However, findings by the PUNCH showed that these firms have paid over N1.98tn in taxes between the first quarter of 2022 and Q1 2023.
Within the period under review, the Federal Government earned N1.32tn through CIT and N661.93bn through VAT from foreign companies.
A breakdown on CIT showed that Nigeria earned N342.4bn in Q1 2022, N80.39bn in Q2 2022, N327.02bn in Q3 2022, N399.98bn in Q4 2022, and N168.23bn in Q1 2023.
On a year-on-year analysis, there was a decline of 50.87 per cent (-N174.17bn) in CIT from foreign firms.
On a quarterly basis, the decline was a bit higher at 57.94 per cent (-N231.75bn).
A breakdown on VAT showed that Nigeria earned N117.99bn in Q1 2022, N11.13bn in Q2 2022, N121.85bn in Q3 2022, N159.83bn in Q4 2022, and N151.13bn in Q1 2023.
On a year-on-year analysis, there was an increase of 28.09 per cent (N33.14bn) in CIT from foreign firms.
However, on a quarterly basis, there was a decline of 5.44 per cent (-N8.7bn).
