Nigeria has refused to sign the Organisation for Economic Cooperation and Development (OECD)/G20 Inclusive Framework two-pillar solution to the taxation of the digital economy.
The reason for refusing to sign the framework, the government said, was in the best interest of the country, and to ensure that Nigeria did not lose out on potential revenue from the digital economy.
This was explained in a statement by the Executive Chairman of the Federal Inland Revenue Service (FIRS), Muhammad Nami.
Explaining why the agreement was unfair to Nigeria and developing countries in general, he said the country, having reviewed the conditions of the agreement, had concerns over the impact the signing of the agreement would have on the country’s tax system and tax revenue generation.
Nami said: “There are serious concerns on how the rules will compound the issues in our tax system. For instance, to be able to tax any digital sale or any multinational enterprise (MNEs), that company or enterprise must have an annual global turnover of €20 billion and a global profitability of 10 per cent.
“That is a concern. This is because most MNEs that operate in our country do not meet such criteria and we will not be able to tax them.
“Secondly, the €20 billion global annual turnover in question is not just for one accounting year, but it is that the enterprise must make €20 billion revenue and 10 per cent profitability in average for four consecutive years, otherwise that enterprise will never pay tax in our country, but in the country where the enterprise comes from, or its country of residence.”
He noted that for Nigeria to subject a multinational enterprise to tax under the rule, the entity must have generated at least €1 million turnover from Nigeria within a year.
Nami said: “This is an unfair position, especially to domestic companies, which, with a minimum of above N25 million (that is about €57,000) turnover, are subject to companies income tax in Nigeria.”