VALUE ADDED TAX ON DIGITAL SERVICES: AN ANALYSIS OF NIGERIA’S APPROACH TOWARDS GLOBAL STANDARDS

Abstract

The emergence of digital services has presented significant challenges for tax authorities worldwide,
particularly in implementing Value-Added Tax (VAT) on cross-border digital transactions. Nigeria
implemented VAT on digital services by amending its Finance Act to align with global trends.
Compliance and enforcement remain challenging, especially for digital service companies based
outside the country. This study compares best practices from various global industries, including the
European Union, South Africa, India, and Kenya, with Nigeria's VAT policy regarding digital
commerce. This study employs a doctrinal method and comparative legal analysis to examine the
research and evaluate the effectiveness of Nigeria's legal system, highlighting areas for
improvement. The findings indicate that while Nigeria's strategy has enhanced revenue from digital
transactions, inefficiencies arise from shortcomings in enforcement policies, noncompliance by
multinational technology firms, and issues related to double taxation. The paper concludes with
policy recommendations for the immediate implementation of a stricter enforcement regime and
enhanced global cooperation to improve digital tax compliance.