Taxation of Electronic Commerce: Prospects and Challenges for Nigeria

77 Pages Posted: 27 Oct 2010

Date Written: August 2010


Globally, taxation is a vexed question, and taxing electronic commerce creates additional challenges. This notwithstanding, electronic commerce holds tremendous potentials as a formidable source of governmental revenue in the light of globalization and increasing automation of commercial transactions in Nigeria.

National and states tax authorities are struggling to find mechanisms to collect the anticipated significant revenues derived from taxing e-commerce profits because the existing regime was set up to handle exchange of only physical goods and services. In some cases, they are even entirely oblivious of the prospect of revenue flow from such a source.

Currently, e-commerce transactions in Nigeria largely escape taxation even though their live transaction counterparts are almost always subject to some form of state or federal tax. This has touched off a lively debate about how to extend tax liability to e-commerce in ways that are in parity with offline taxes; whether sales taxes should be restructured or replaced; and even whether e-commerce should be tax-free.

Although the challenges are universal, the peculiar problems of deplorable infrastructural deficiency, obsolete legislations, lax implementation of existing laws, hydra-headed corruption as well as widespread ignorance make taxing electronic commerce all the more intriguing in Nigeria. Added to these is the sophistication and complexity of the technology involved in such transactions.

The modest ambition of this research work is therefore to describe and evaluate the main issues involved; analyze the legal challenges posed by cyberspace transactions that defy traditional conceptions of trade. The tremendous benefits accruable to the nation will equally be identified. It will be demonstrated that whilst information and communications technology’s efficiencies certainly allow some (perhaps many) activities to be coordinated online, all enterprises still need to have real, and not virtual, people, assets and business operations.

The intended outcome is a comprehensive framework for the taxation of e-commerce profits that incorporates (with necessary modifications) traditional international tax principles since it is clear that any reform will require significant international cooperation. Flowing from all these will be a realization that taxing e-commerce is not necessarily harmful to Nigeria as a developing and technology importing country and that, it is indeed in our best interest to do so in order to boost government’s revenue drive and to procure requisite manpower as well as technology in line with global trend.

Accordingly, Chapter I will focus on preliminary considerations and foundational understanding of the concept. The second chapter probes deeper into the dynamics of e-commerce – its nature, taxation challenges and other allied issues. The thrust of Chapter III is the international dimension of the discourse on taxation of e-commerce. The last chapter shall be devoted to analyses of indices to be considered in the formulation of a legal framework for e-commerce taxation.

Keywords: e-commerce, taxation, Nigeria

Suggested Citation

Oduntan, Olugbemi Adebayo, Taxation of Electronic Commerce: Prospects and Challenges for Nigeria (August 2010). Available at SSRN: or

Olugbemi Adebayo Oduntan (Contact Author)

affiliation not provided to SSRN ( email )

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