Nigeria is leveraging the growth of digital payments to increase Value Added Tax (VAT) collection. Officials said today that the surge in cashless transactions provides an opportunity to strengthen tax revenue without raising rates. Mobile-money operators, fintech platforms, and online marketplaces are central to the plan.
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Addressing compliance gaps
Currently, VAT leakages are high due to underreporting and inconsistent compliance. Authorities aim to integrate automated VAT-deduction systems across payment processors to ensure transparency, minimise errors, and simplify reporting.
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Industry response and challenges
Fintech operators expressed concern about implementation costs and system integration. Regulators, however, argue that automation will benefit businesses and government alike. Experts also note that this approach is preferable to raising tax rates, which could hurt consumers and SMEs.
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Nigeria’s focus on digital-payment VAT aligns with its broader strategy to modernise tax administration and reduce dependence on oil revenue. For SMEs, clear guidelines and simplified compliance tools will be crucial for smooth adoption. Analysts believe improved VAT capture could add billions to government revenue annually.
