JEE Africa

A New Order for Digital Businesses in Nigeria

Why is there a renewed focus on Taxation of Digital Businesses?

One of the most significant impacts of technology on the world has been the design of business models that rely heavily on the internet, resulting in a remarkable decline in traditional ”brick and mortar” establishments. Today, world-leading technology companies run a largely digitized business with minimal or zero physical presence in their countries of operation but are still afforded the opportunity of reaching multiple locations from a single or few operational bases. This is due to the “borderless” nature of the internet as a marketplace. These types of businesses are part of the trendy “electronic commerce” club. Such a business model comes in many forms but may generally refer to the ability to perform transactions involving the exchange of goods or services between two or more parties using electronic tools and techniques.

Digital business owners typically argue that they are not within the legal jurisdiction of the countries whose residents access their services, as they are neither registered in those countries nor do they maintain any physical office. The apparent advantage to this model is that they are typically not obligated to comply with the domestic laws of these countries nor undergo registrations, pay fines, and perhaps most importantly, pay tax. It is trite at law, that for one to fall within the ambit of taxation in any given jurisdiction, the tax jurisdiction of such country must be well defined, and the law must expressly provide the basis upon which the company in question is being taxed.