TAXING THE DIGITAL SECTOR OF THE NIGERIAN ECONOMY: CHALLENGES AND PROSPECTS

Abstract

The digital economy is fast becoming the most innovative and widest reaching economy in the world. The growth and
development of digital trade facilitate globalization and ensure international development through the establishment
of borderless economic relationship inter alia. However, Nigeria may find that it is unable to tax the huge income
that the digital economy would generate unless it amends its laws to adapt to changing technological advancement.
Consequently, the Finance Act of 2019, 2020 and 2021 were enacted with their innovations regarding digital
economy. The provisions of the CITA (Companies Income Tax Act) prior to amendment in 2019 were not sufficient
to bring digital companies within the tax net, and the directives by the FIRS (Federal Inland Revenue Service) were
surrounded with a lot of ambiguities and many controversies. Notwithstanding, the recent amendments introduced
by Finance Act of 2019, 2020 and 2021, the application and enforcement of these provisions remain the persistent
challenges to effective taxation and administration of digital economy in Nigeria. This paper examines the nature of
digital economy in Nigeria. It also, considers the challenges in taxing the digital economy and the prospects in taxing
digital economy. The paper concludes by making recommendations on measures to be adopted by the Government
and Revenue authority for effective taxation of the digital sector.