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2 IJOCLLEP 1 (2020)

handle is hein.journals/inljlocv2 and id is 1 raw text is: IJOCLLEP 2 (1) 2020
Electronic commerce is the marketing, selling and buying of products and services on the internet. Prior to the
enactment of the Finance Act 2019, the Nigerian Tax law and regime did not envisage the emergence of electronic
commerce and online transactions of economic nature. The reality however is that there has been advancement
in Information and Communications Technology (ICT) worldwide thus making the world a global village. The
rate of transactions of taxable nature that are carried out virtually is increasing by the day and as without the
legal framework for its taxation, they escape taxation by the Nigerian Government and this is a revenue loss to
the Government. This paper examined how e-commerce was taxed prior to the enactment of the Finance Act 2020
and how the Act has brought e-commerce into the Nigerian tax net whether it is transactions between Nigerians
or non-Nigerian residents and a Nigerian resident. This paper examined the framework for taxation of electronic
commerce under four major tax laws, that is, Personal Income Tax Act, Companies Income Tax Act, the Value
Added Tax Act and the Finance Act. The authors adopted the doctrinal research methodology. Theorizing with
the aid of laws, books and case laws the paper highlighted the position of these tax laws on e-commerce taxation
and made suggestions on how these laws can be improved to ensure that Nigeria as a developing economy does
not lose out on the revenue that e-commerce generates.
Keywords: E-commerce, taxation, digital economy, value added tax, non-resident companies.
1. Introduction
Electronic commerce alternatively known as e-business, e-commerce or internet commerce is generally
considered to involve the use of electronic systems such as the Internet and other computer networks to facilitate
the production, distribution, sale, and delivery of goods and services1. The World Trade Organization (WTO)
defines e-commerce as performing production, advertisement, selling, and distribution of goods and services over
telecommunication networks2. The Organization of Economic Cooperation and Development (OECD)3 defines e-
commerce activities as those transactions that associations and individuals perform, that are related to trade, and
grounded in transmission of digitized data, such as text, audio, or video, over open or closed networks4. United
Nations Commission on International Trade Law (UNCITRAL) defines e-commerce as exchange of every kind
of data message in the scope of commercial activities.5 The Chartered Institute of Taxation of Nigeria (CITN)6
made a distinction between e-commerce which was generally defined as the marketing, selling and buying of
products and services on the internet, and e-business which was defined as the use of electronic information to
improve performance, create value and enable new relationships between businesses and customers.
E-commerce therefore is the conduct of commercial transactions whether buying or selling of goods and services
or entering into other transactions of commercial nature, carried out through the instrumentality of the internet.
There is a shift from a physically-oriented commercial environment to a technology-driven electronic
environment; this shift poses serious and substantial issues in relation to taxation and taxation regimes.7 Tax
administrators throughout the world face the formidable task of protecting their revenue base without hindering
* By Meshach N. UMENWEKE, PhD, BL, Professor and Dean, Faculty of Law, Nnamdi Azikiwe University, Awka,
Anambra State; and
* Ginikachi Nkem ONYENUKPORO, LLB, LLM, BL, Alumna, Faculty of Law, Nnamdi Azikiwe University, Awka.
1CE McLure, Jr., Taxation of Electronic Commerce in the European Union (California USA: Hoover Institution, Stanford
University 2001) www.citeseex.ist.psu.edu/down accessed 12 January 2020.
2WTO General Council, Work Programme on Electronic Commerce, adopted by the General Council on 25 September 1998,
30 September 1998 WT/L/274, retrieved from  http://www.wto.org/english/tratope/ecome/wkproge.html accessed 30
January 2020.
3The Organization is dedicated to economic development and consists of 35 member nations e.g. Australia, Canada, Germany,
France, United Kingdom, United States e.t.c, Nigeria is not a member but recently, on 14 June, 2017 the Federal Executive
Council (FEC) approved a memo submitted by the Minister of Finance seeking inclusion as a signatory to the OECD
Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting.
treaty/ accessed 12 January 2020.
4OECD, 'Update of the OECD Statistical Definition of E-commerce', Report DSTI/ICCP/IIS(2009)5/FINAL(2010).
5The United Nations Commission on International Trade Law, Model Law on Electronic Commerce, GA/Res/51/162, 30
January, 1997 Article 1.
6 CITN, 'Taxation within the context of Globalization' (2001) Tax Planning International E-commerce Journal ,VOL.3
Number 7, 2.
7 Richard Jones & Subhajit Basu, Taxation of Electronic Commerce: A Developing Problem, (2002) Vol. 16 No. 1,
International Review of Law Computers &Technology, p.35


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