The Nigerian government is considering introducing a 5% tax on online purchases which could adversely impact the fledgling online marketplace industry.

Chairman of Federal Inland Revenue Service Babatunde Fowler mentioned the possibility in an interview with Premium Times

“We are thinking that maybe next year, we will advise banks to start deducting 5% VAT for all online purchases done locally (using bank cards),” he said.

The tax body wants to capture the regular 5% VAT on local purchases, from international transactions. Many African shoppers, including those in Nigeria, buy from foreign sites because of their trusted brand and online payment security. These sites include AliExpress and Amazon. Local companies like Jumia and Konga also offer verticals allowing shoppers to buy from foreign retailers.  

If approved, the policy will affect revenue as users would want to avoid the 5% hike in prices. It could also attract users to sites like Jumia and Konga with their propriety payment gateways and mobile wallets. Mobile payments won’t be taxed since the government is only looking to tax card-based transactions. 

Some entrepreneurs believe there might be slight hope as the government has a penchant for not following through with announcements at times. Fowler, on the other hand, has developed a reputation for making good on his word. In the last two years, he has gone after the country’s feared billionaires and companies in a bid to capture unreported personal and company taxes.    

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