In a way, I am happy that government has raised a high-powered team to discuss with Twitter, the microblogging website. However, I am not certain what this team will achieve that will be of economic, rather than political, benefit to Nigeria.
There are two reasons for pessimism.
One is the composition of the team. It has Lai Mohammed, Abubakar Malami, Babatunde Fashola, Geoffrey Onyeama and Festus Keyamo, all lawyers. The only person with some level of technology experience is Isa Pantami. It is doubtful if any of them understands digital business as it has evolved today. It also does not have a finance and tax representative.
The other reason for pessimism is because, after restricting Twitter services, Alhaji Lai Mohammed, Information Minister and leader of the team, made many pronouncements, which betray how the mind of government may be working on the matter. For instance, AFP quoted him as saying that “Twitter’s suspension in Nigeria will end once the US social media giant submits to local licensing, registration and conditions…”
“First and foremost,” the minister said, “Twitter must register as a company in Nigeria,” as a condition for lifting its ban. It will be licensed by the broadcasting commission and must agree not to allow its platform to be used by those who are promoting activities that are inimical to the corporate existence of Nigeria.”
This is simply at best a two-year subsisting nonsense, if that is what the team will be discussing. It does not make sense. Under our laws, any company seeking registration must warrant that it has a physical address and its directors must also disclose their individual physical addresses. Is the minister, therefore, saying that Twitter must establish a physical presence in Nigeria and be made to pay every local tax? If he were, then we must ask where he has been since 2019 when two momentous events happened in Africa!
Is the minister not aware that Twitter has already made its decision about where it wants to locate its African operations, and that it chose Ghana, much to our chagrin? Can deleting President Muhammadu Buhari’s tweet be used as blackmail weapon to force Twitter to trash its business plans and projections for Ghana in favour of a Nigerian presence? Is the minister actually saying, in other words, since Twitter has capacity to deliver services to citizens all over the world, it should establish a physical presence in every country? Where on earth does this happen, something that no country on earth has been able to do? Even the United States and China, the two biggest economies of the world, have not been able to establish a physical presence in every country of the world! In our own continent, save for South Africa, there is no other country that has up to 100 diplomatic offices in the world. Requiring Twitter to have a physical presence in Nigeria is, therefore, mere tantrum-throwing and nothing else.
There is another thing. I agree with the minister that Twitter should pay taxes. But where the world is going is for digital multinationals to pay tax on cross-border financial transactions that are paid for from a country such as Nigeria. Is the minister aware that this is exactly what the Buhari government has been trying to do since 2019 with the Finance Act? The government team should do its homework on taxation for cross-border digital and financial transactions before its meeting with the Twitter team. It is a golden opportunity that will be wasted with the political team that is about to enter into talks.
It’s funny that Alhaji Lai, going by his prior statements, appears not to be aware of efforts made by the administration to deal with the digital taxation issue, through the act. There is a relevant section of the Finance Act, which provides that a multinational corporation is liable to tax “if it transmits, emits or receives signals, sounds, messages, images or data of any kind from cable, radio, electromagnetic systems or any other electronic or wireless apparatus to Nigeria in respect of any activity, including electronic commerce, application store, high frequency trading, electronic data storage, online adverts, participative network platform, online payments and so on, to the extent that the company has significant economic presence in Nigeria and profit can be attributable to such activity.”
Tax experts who weighed in on the matter (when the Finance Bill was being debated) largely agreed that there is need to ensure that our government gets value from cross-border online and digital transactions.
In simple terms, when a U.S. foreign entity in the likes of Facebook, for example, uses Internet to carry out financial transactions in Nigeria, it will be cheating the Nigerian government of taxes on the transactions. This is because those transactions took place in Nigerian cyberspace and were paid for by Nigerian citizens resident in Nigeria. So, yes, any company that has significant economic presence (SEP) in Nigeria, with customers that are resident in Nigeria, is liable to transborder tax. In the case of Twitter, we are talking about 40 million plus customers, some of whom carry out cross-border financial transactions using online payment systems. If we had done the right things after the bill was signed into law by Mr. President, Twitter and other service providers would have been filing for appropriate tax(es) with the relevant tax authority long before now.
There are many more things that the Nigerian government could do to attract taxes from such multinationals without requiring them to establish a presence in our country. Things like making sure Nigeria establishes and quantifies a user base, ability to measure digital content that Nigerians contribute, and enacting policies and regulations that force them to bill their services and collect in local currency, and requiring them to carry out targeted marketing and sales promotion activities in Nigeria and tracking those. Do the right things. Pluck the hanging fruits. The minister in charge of digital economy is not doing as much as he should to promote innovations and investments in that sector.
We are also not aware that the Minister of Finance has announced an order on how to implement digital taxation, based on the Finance Act. And, at the macro level, when will Nigeria negotiate and enter into a double taxation agreement with the U.S. to sort out a lot of these matters from which the country is haemorrhaging under its negatively weighted trade relationship?
The team should note that digital multinational companies such as Facebook, Twitter, Amazon, YouTube, Google, Netflix, PayPal and so forth operate in physical locations and virtual ones. Governments of the world have largely agreed that they should not tax cross-border reach without physical presence. Rather, most governments focus on purchased goods using e-commerce. Therefore, rather than attack youths shooting the breeze with Twitter, why not go after the payment solutions that they are using to suck money from the system – if they do so without paying taxes? And, by the way, it is not entirely correct to say that these companies are not paying taxes either. They do, albeit indirectly.
Government collects VAT on computer and handheld devices used for conversations or transactions, and also collects VAT on data purchased to access the social media platforms. Although some of us deferred to the finance experts on how to implement the law with respect to digital taxation, we still hold as dubious an act that focused on how to tax the digital economy without associated reference to how this economy can be grown.
What government should, therefore, be doing should have been to look for ways to expand before taxing the new digital economy. And now we are engaging in theatrics that will further shrink earning potential of hapless youths and further raise unemployment levels.
Truly, we least expected that Nigeria would be quarreling over a platform that gives youths opportunity to learn, connect to the world and earn income in the face of shrinking growth in virtually every economic sector. The World Bank projects that, if government were to improve digital economy, digital skills and digital financial services, it can “unleash new economic opportunities, create jobs and transform people’s lives.” Why trample on the opportunity through what will turn out to be a legal jamboree when the alternative is to seize the moment?
Thank goodness that deleting the President’s tweet has provided this opportunity, which government managers could seize to focus on digital taxation as provided for by the Finance Act of 2019. We do not expect the team to waste the opportunity by fighting Mr. President’s ego battles. It should also discard Alhaji Lai’s prior infantile vituperations by not asking Twitter to pay tax as a punitive measure or to establish a physical presence in Nigeria.