By Ngozi Onyeakusi — From January 2020, Nigerian banks will start charging Value Added Tax on local and foreign online transactions.

The Chairman of the Federal Inland Revenue Service, Babatunde Fowler, made the disclosure while speaking at a technical workshop organized by the African Tax Administration Forum in Abuja.

Fowler noted that African countries would invest over one trillion dollars on infrastructure over the next 10 years even as he assured that the plan to tax online transactions would require legislative backing.

“In 2020, we will be asking the banks to charge VAT on online transactions. We have started engaging stakeholders and we are addressing all concerns around it,” he said.

This activity is aimed at ascertaining those companies that are compliant with the tax laws and those that are not,” he said.

Stressing the importance of VAT, Fowler noted that the African Tax Outlook (2017) rated VAT as the highest tax revenue earner, followed by Petroleum Income Tax and Company Income Tax.

“VAT remains the cash cow in most ATO countries with an average VAT-to-total tax revenue ratio of 31 per cent, which is higher than the Organisation for Economic Cooperation and Development average of 20 per cent,” he observed.

He said there was a need to adapt VAT systems to technology for effective taxation on cross-border digital trade.

According to him, businesses and tax administrations need to respond to issues relating to data ownership and taxable presence.

Executive Secretary of ATAF, Mr. Logan Wort, said the association was already looking at tax issues that would arise from the investment of about a trillion dollars on infrastructure in African countries over the next 10 years.

“Over a trillion dollars is slated for investment towards infrastructure development over the next 10 years. I mention this because the continent is filled with new developments, high rising buildings and construction projects.

“The ATAF VAT Technical Committee has noted these developments and commenced work on guidance on VAT issues arising from the construction sector,” Wort said.

Nigeria is ranked third in terms of construction projects in Africa, behind Egypt and South Africa, in first and second position, respectively.

“The 2018 edition of Deloitte’s Africa Construction Trends report indicated that as of June 2018, Africa had 482 projects, each valued at US$50 million or above.

“In total, these construction projects were valued at US$471bn. This was an increase of 53 per cent of the total value of US$307bn recorded in 2017.

“In 2018, the top three countries in terms of construction projects were Egypt, South Africa and Nigeria. Egypt had the highest recorded number of projects, totalling 46 and accounting for 9.5 per cent of African projects.

“In terms of value, Egypt also topped Africa, recording projects worth $79.2bn. This accounted for 17 per cent of the continent’s value of projects.”

Wort also spoke of the potential of VAT on online transactions.

He pointed out that online transactions posed challenges to the jurisdiction of tax income.