Nigeria has abandoned the OECD-backed tax treaty for revenue concerns

Nigeria has not joined an international tax treaty mediated by the Organization for Economic Cooperation and Development as it would result in a loss of revenue to Africa’s largest economy.

The requirement that signatories pay tariffs on digital sales of multinationals with only 20 billion euros ($ 21.4 billion) annual global turnover and 10% global profits was a matter of “concern” because “most companies operating in our country do not meet such standards.” Muhammad Nami, executive chairman of the Federal Internal Revenue Service, said in an emailed statement.

Africa’s top oil producer, which has one of the lowest tax collections in the world, has refused to sign an OECD-led effort to reform international tax rules to allow multinational corporations, wherever they may operate, to pay their fair share of taxes. The reforms are aimed at ensuring that multinationals have a minimum tax rate of 15% from 2023. About 130 countries, representing more than 90% of global economic output, have signed up to join the global tax treaty.

Although the OECD agreement is not in Nigeria’s favor, Africa’s most populous country has developed internal solutions to raise more taxes in the digital economy, according to Nami. The tax agency introduced digital-service tax in January to boost revenue, and tax collection in February is projected to increase from 6.4 trillion naira in 2021 to about 10 trillion naira this year, supported by increased automation and the installation of ICT infrastructure.

© 2022 Bloomberg

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