Customers of two of Nigeria’s biggest eCommerce platforms, Konga and Jumia may be charged 5% Value Added Tax as from next year when they use bank cards to pay for their online purchases according to the Chairman of the Federal Inland Revenue Service (FIRS) Tunde Fowler.
Premium Times which spoke to Fowler quoted the FIRS boss as saying that: “With the existing laws in Nigeria, we can appoint the banks as agents. First of all, all those who make payments for purchases online using bank cards and instruct their bankers to pay, we will tell the banks that, going forward, everyone who gives instructions for service for purchase online, they should deduct five per cent VAT,” he said.
“We are thinking that maybe early next year, we will advise banks to start deducting five per cent VAT for all online purchases done locally,” he added.
It is interesting to note that today most customers of local eCommerce platforms prepay for their orders because they get cashback for choosing to prepay and it is also safer.
However, if the 5% VAT is implemented, it may become a hindrance to the Central Bank of Nigeria’s drive for a cashless economy because customers who do not want to pay the VAT may now choose the Pay On Delivery option.
Therefore, charging the VAT is definitely not one of the most ingenious ways to boost Nigeria’s digital economy and promote a cashless economy. It is simply an option being looked at by the government to boost tax revenue.
In fact, the government should be considering how to grant tax breaks to eCommerce firms like Jumia and Konga whose operating costs are over the roof rather than planning to tax their customers which cut across Nigeria.