Taxation of the Digital Economy in Nigeria as a Tool for Economic Development: Challenges and Prospect

Abstract

This paper examines taxation of the digital services under Nigeria’s new tax regime as a tool for economic development, with specific focus on the legal, institutional, administrative, and international challenges affecting effective taxation of the digital economy. The growth of digital platforms and cross-border online transactions has transformed commercial activities and created significant revenue opportunities for governments. However, traditional tax rules especially in less developed nations have struggled to capture income generated through digital presence without physical establishment. Nigeria tackled this issue through intermittent Finance Acts and the recent tax reforms, incorporating measures aimed at expanding the tax net to digital service providers. The study aimed at critically analysing taxation of digital services under Nigeria’s new tax regime and evaluating the challenges confronting effective implementation. The objectives of the paper include the examination of the legal framework regulating digital taxation in Nigeria, analysis of jurisdictional and enforcement challenges, and assessment of international standards influencing digital taxation in Nigeria. The study adopts a doctrinal research methodology. Primary sources consulted include statutes, international conventions, regulations, and judicial authorities, while secondary sources consulted include textbooks, journal articles, reports, and internet materials. Findings from the paper reveals that Nigeria has so far made significant progress through introduction of new tax legislations and alignment with emerging global tax standards. However, the absence of clear enforcement mechanisms, limited international cooperation, technological limitations, and the historical inconsistencies in tax administration continue to hinder the overall effectiveness of taxation in Nigeria as a tool for development. Clear jurisdictional rules, stronger international cooperation, improved technological capacity for tax authorities, harmonisation of tax administration procedures, and continuous review of digital tax policies are recommended to be put in place in order to reflect evolving technological advancements for optimum performance and development in Nigeria.