Digital Tax: An Overview of the Companies Income Tax Act and Challenges Arising from Taxation of the Digital Economy

Abstract

Technological advancements in the world today have prompted companies to leverage digital commerce in making massive economic gain by directly engaging consumers in other climes with little or no tax. This development has necessitated taxation of the digital economy in Nigeria as informed by the Organization for Economic Cooperation and Development (OECD) through Action 1 of its Base Erosion and Profit Shifting (BEPS) Project. The digital economy is however still in its infancy in Nigeria and therefore policy, fiscal and regulatory support are necessarily required to nurture it to maturity for the overall long-term benefit of the economy.

This paper, therefore, sets out to examine the Companies Income Tax Act (CITA) and its implication on the taxation of the digital economy in Nigeria. It is written against the background of the amendments made by the Finance Act, 2019 and Finance Act, 2020 in relation to digital tax and extant case law on the subject. Furthermore, this paper seeks to examine the likely challenges posed in the enforcement of the extant law on digital taxation and to proffer recommendations informed by these challenges.

Keywords: CITA, Digital Tax, Digital Economy, Taxation