Reactions have continued to trail reports of proposed 5% Value Added Tax (VAT) deducted from users for online transactions, starting early next year.
Kaiglo and Jumia Nigeria are the latest responders to the report credited to Chairman of the Federal Inland Revenue Services (FIRS), Tunde Fowler, who reportedly dropped the hint during an interview with PreimumTimes.
Mr Tunde acknowledged that Nigeria was not prepared for a digital economy, however, he revealed that the need for this taxing was supported by existing laws in the country.
He also said that Nigeria for a long time had the lowest VAT rates of 5% in the world until recently when the United Arab Emirates (UAE) introduced a 5% VAT rate.
But, in a reaction to the proposal, the Co-Founder and Chief Executive Officer of Kaiglo, Mr. Victor Chukwuebuka Eze, in a chat with TechEconomy.ng, faulted the moves by FIRS.
He said, though, it is in order to tax the digital economy, however, the industry (in Nigeria) is still at infancy stage; requiring a lot of incentives to drive attraction.
The Kaiglo boss believes that the Federal Government should focus on enacting good policies to support the industry.
In his words: “Well, it is okay to be taxed, but am afraid that will end up killing the industry. But, the Nigeria online industry is still at a nursery stage and therefore needs more nursingg time.
“What the industry needs presently is good policies to support it; that will encourage more Nigerians to key in and consume online
Mr. Eze believes that the 5% VAT on online transactions will jerk up charges on online services.
“With an extra 5% tax, cost of online services will go up. That won’t be encouraging at all.
“Government can think of taxing the industry when internet companies start recording good annual returns. Maybe as regards the volume of transactions made within the year”, he added.
But, Jumia Nigeria has a different perspective to the proposal.
Asked if the Company is aware of this plan and how will Jumia react to it, the Head, PR & Communications – Jumia Nigeria, Olukayode Kolawole, in an interview with TechEconomy.ng, said, “Yes, we read about the intention of the apex tax body FIRS to, come 2020, commence a 5% VAT charge on all online card transactions. We understand and commend the agency’s commitment towards meeting its target and driving eligible tax payment across all business spectrum in the country.
“Already, Jumia remits local taxes for which we’re eligible to the government. We also pay all statutory taxes which include VAT, Withholding Tax and PAYE taxes, and all the mandatory deductions legislated by law.
He further said that FIRS should consult widely before implementation.
Kolawole continues: “We however believe that for an efficient implementation of this proposal, the FIRS should entertain a wide consultation with key industry players within the e-commerce sector to understand the impact of its decision on the various stakeholders. Some of the attendant challenges that need to be addressed before the implementation will include, how to differentiate trade and non-trade transactions, handling of refunds when a purchased item is returned by the customer, how to drive card payments among customers who might prefer cash on delivery to avoid paying the VAT, and how to prevent double taxation.
“These are some of the main issues we believe the FIRS should consider before finally signing this off. And these are not applicable to just Jumia customers, they have huge implications on all online businesses and their customers”.
Meanwhile, Fowler also revealed plans to widen the taxpayers net to improve the tax revenue.
He furthermore shared that the banks would be the avenue used to get the VAT from online buyers, asking them to deduct it as carry out the payment transactions.