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Fowler urges developing countries to grow VAT, digital economy earnings

Fowler urges developing countries to grow VAT, digital economy earnings

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Chairman of the Federal Inland Revenue Service, Mr. Babatunde Fowler, has advised developing countries to grow Value Added Tax (VAT) and tax revenue from the digital economy to lessen dependence on revenue from natural resources.

Fowler, who is also the First Vice Chairman of the United Nations International Committee of Tax Experts and Chairman, African Tax Administration Forum (ATAF), recently gave the advice in New York in an address delivered at the opening of the Meeting of the United Nations’ Economic Council (ECOSOC) on Taxation and Digitalisation of the Economy and Taxation of ODA-Funded Projects.

He explained that developing nations should focus on taxation, as they have no control over prices of goods produced by developed economies from the natural resources they export.

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Using technology to capture all the VAT available, Fowler said Nigeria, in the last one year, has increased its tax revenue base by 800,000 corporate accounts and grown non-oil tax revenue to a stage that it accounts for 64.3 percent of total revenue from 42.8 percent between 2012 and 2014.

“We have moved away from an oil-dependent revenue source to a non-oil revenue source. At the same time, we have focused on VAT. VAT continues to be the fastest growing tax type in the world and I was quite amazed when the UAE spoke about introducing VAT,” he said.

Fowler disclosed that Nigeria realised N767 billion from VAT in 2015, N828 billion in 2016 and N972 billion in 2017, representing a growth of about 25 percent, a development he ascribed to political will, international collaboration and cooperation of the judiciary, which recently yielded a favourable judgement over Vodacom in the case of VAT liability for a non-resident company.

He urged other developing countries to follow the Nigerian example, which includes tax treaties that assist collection and remittance.

He maintained that the only way to ensure sustainable socio-economic development is through taxation and called on developing countries to reform their tax processes, adding that 90 percent of items produced in developed economies is sold in developing economies, depriving the latter of profits and taxes.

On tax revenue from digital economy, Fowler counselled developing countries to take a cue from their developed counterparts so as not to be left behind while urging the UN to show greater interest in the tax affairs of the developing countries.

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“If we look at the issue of Apple and Ireland, the other members of the European Union (EU) found out that Ireland, in giving certain tax benefits, had an undue advantage for business and the EU insisted that Apple should pay EUR13 billion as tax,” he explained.

He equally noted that many countries have come up with individual strategies to ensure that they get some tax revenue from the digital economy.

India, he said, applies a six per cent equalization levy for specified services provided by non-residents.

The Argentine government, he added, requires a foreign supplier to register for VAT in Argentina while the city of Buenos Aires applies a levy via Withholding Tax mechanism that requires debit and credit card firms to withhold three per cent of the net amount of any payment remitted to them.

The post Fowler urges developing countries to grow VAT, digital economy earnings appeared first on The Sun Nigeria.

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