BRIDGING TAX GAP IN NIGERIA THROUGH TAXATION OF DIGITALIZED COMPANIES: ANY PROSPECT?

Nwaobia, Appolos Nwabuisi () and Akintoye Ishola Rufus ()
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Nwaobia, Appolos Nwabuisi: Department of Accounting, Babcock University, Postal: Department of Accounting,, Babcock University, Ilisan-Remo, Nigeria,, https://journal.citn.org/
Akintoye Ishola Rufus: Department of Accounting, Babcock University, Postal: Department of Accounting,, Babcock University, Ilisan-Remo, Nigeria, https://journal.citn.org/

Journal of Taxation and Economic Development, 2019, vol. 18, issue 2, 110-126

Abstract: The emergence of the digital economy and digitalized transactions has been a global concern as they have raised new challenges to tax authorities. Volumes of transactions are completed by entities online without physical presence in the country. National tax laws have not kept pace with the globalization of corporations and the digital economy, thus leaving gaps that have been exploited by multi-national corporations and the digitalized companies to avoid and evade taxes. The impact has been reported widening of tax gaps, dwindling tax revenues and effective tax rates and low economic growth. Taxation of digital companies is an emerging issue for which there is scarcely any empirical study anywhere but a lot of work and reports by OECD and G20 addressing the challenge are available. The study examined the prospects of bridging tax gap in Nigeria through the taxation of digitalised companies. Desk review and analytical research approaches were adopted. Literature on the areas of tax gap as well as digitalization and taxation challenges were reviewed. Sections of available legal framework on taxation of companies were also consulted and analysed in the context of taxation of digitalized companies. Reports of works by OECD and G20 were reviewed and assessed with a view to deriving policy direction from them that may inform action in the Nigerian context. Findings reveal lack of wholistic legal and tax administrative frameworks as well as intelligence gathering structures for the taxation of digital transactions in Nigeria. The study concluded that Nigeria can leverage on the works and recommendations of OECD, G20 and EU as well as recent practices in some jurisdictions in addressing the tax challenges of the digital economy. The following imperatives for the taxation of digitalized companies in Nigeria were recommended, namely collaboration and multilateral agreements for exchange of information, fully digitalized tax administrative system with corruption resistant tax structures, robust tax laws and taxation framework and strong and equitable tax systems that can enhance taxpayers' trust in government and tax authorities.

Keywords: Tax gap; Digitalised companies; Expediency theory; Tax-to-GDP ratio; Tax revenue (search for similar items in EconPapers)
Date: 2019
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