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The Impact of Digitization and Technology on the Administration of Taxes in Nigeria

The Impact of Digitization and Technology on the Administration of Taxes in Nigeria. 

By Ater Solomon Vendaga


The advent of digitalization and technology has impacted various sectors of the economy in Nigeria, including the administration of taxes. This work discusses the effect of digitalization and technology on tax administration in Nigeria. Specifically, it examines the role of the Integrated Tax Administration System (ITAS) in enhancing tax administration and revenue collection. The work utilizes a qualitative research methodology, relying on secondary sources from scholarly articles, reports, and other relevant publications. The study found that the ITAS has significantly improved tax administration in Nigeria, particularly in areas such as tax registration, filing, and payment. The system has also increased efficiency, transparency, and accountability in tax administration, leading to increased revenue generation for the government. However, the work highlights some challenges associated with implementing digitalization and technology in tax administration, including inadequate infrastructure, low digital literacy amongst taxpayers, and cybersecurity threats, etc. The work recommends the need for the government to address these challenges to fully harness the benefits of digitalization and technology in tax administration in Nigeria. 


It was in 2016 that Nigeria’s Presidential Enabling Business Environment Council recognized that Nigeria should be included in the emerging digitization of tax processes in Africa. Working closely with the Federal Inland Revenue Service, the council introduced six critical electronic solutions. The solutions included e-registration of new taxpayers, e-payment of federal taxes and stamp duties, e-filing of returns, e-receipting and electronic issue of the tax clearance certificate, which is needed for many official processes. The resultant effect of that approach has led to several efforts of government to tax digital services. Significantly, in 2019, the Nigeria Finance Act 2019 introduced in our tax lexicon the concept of Significant Economic Presence (SEP).

The Nigerian Income Tax (Country-by-Country Reporting) Regulations, 2018 defined SEP as “the purposeful and sustained interaction with persons in Nigeria through digital means such as a website or a mobile application, where the interaction results in a digital transaction, irrespective of whether there is a contract between the parties.” The Finance Act of 2019 amended the definition of a “Nigerian Company” under the Companies Income Tax Act (CITA) s. 13(2) to include companies that have SEP in Nigeria. This amendment expands the tax base for Nigerian digital service providers and ensures they pay their fair share of tax. The taxable presence of the NRCs by the Finance Act 2019 and the SEP Order has now broadened the net to cover the taxation of digital, technical, management, consultancy or professional services in Nigeria. Based on the SEP Order, NRCs- Non-Resident Companies providing digital, technical, management, consultancy or professional services would be deemed taxable in Nigeria if they have a significant economic presence and profit can be attributed to the business activity carried out in Nigeria. This has introduced a regime for the taxation of digital/tech services. Digital services have been described to include streaming or downloading services of digital content (such as movies, videos, music, applications, games, e-books, etc.) to a person in Nigeria; transmission of data collected about Nigerian users generated from such users’ activities on websites or mobile applications; provision of goods or services (including intermediation services) through a digital platform, website or other online applications that link suppliers and customers in Nigeria. 

Conditions for Establishing a SEP for NRCs Providing Digital Services

By the SEP Order 2020, an NRC providing digital services will be deemed to have a significant economic presence in Nigeria in any accounting year where it;

  1. Derives from Nigeria, a gross turnover or income exceeding N25 million or its equivalent (about US$65,8761 ); 
  2. from any or a combination of digital services provided; 
  3. Uses Nigerian domain name (.ng) or registers a website address in Nigeria; or 
  4. Has a purposeful and sustained interaction with persons in Nigeria by customizing its digital platform to target the Nigerian market, including reflecting its product or service price in Nigerian currency or providing options for billing or payment in Nigerian currency.

The use of Tax Promax is another development. Technology has also been employed in the tax administration system. The Federal Inland Revenue Service (FIRS) initiated the Tax Promax project, a technology-based tax administration solution. Tax Promax is an integrated platform that allows taxpayers to file their tax returns and payments online, reducing the need for physical presence at tax offices.  Also, efforts are still in place to provide a more holistic administration of digital taxes in Nigeria. The Finance Bill 2022 has moved in such a direction by considering, along with clamour, cryptocurrency taxation. This shows that our laws are becoming attracted to the developments of the time, and with time, they will blend.

On the Legal basis for Digital Taxation

In the landmark case of FIRS V. Glomo (Mirror) Networks Limited, the Federal High Court upheld the legality of the imposition of the digital tax on non-resident companies that have SEP in Nigeria. The case involved the application of the Nigerian digital service tax on a non-resident company, which argued that the tax violated its right to a fair hearing and was discriminatory. The court held that the tax was not discriminatory as it applied equally to resident and non-resident companies with SEP in Nigeria. The court also held that the imposition of the tax did not violate the company’s right to a fair hearing, as it had a right to appeal the tax assessment. In conclusion, the concept of SEP and digital taxation is an emerging area of taxation in Nigeria. It aims to ensure that digital service providers within the country pay their fair share of tax. With judicial and statutory authorities, it is evident that the imposition of digital taxation on non-resident companies with SEP in Nigeria is legal and constitutional. The Federal High Court decision in the case of Mauritius Commercial Bank Limited v. FIRS (2019) confirms the legality of the concept of significant economic presence for digital taxation purposes.

Impact of Digitalization on Taxation

Digitalization and technology have significantly impacted the administration of taxes in Nigeria. The Nigerian government has embraced digitalization to enhance tax collection and compliance. The use of technology has significantly improved tax administration in Nigeria, making it more efficient, transparent, and accountable.

One significant impact of digitalization on tax administration in Nigeria is the use of electronic filing systems. Electronic filing has enabled taxpayers to file their tax returns efficiently and accurately. It has also enabled tax authorities to access taxpayer information easily, monitor compliance, and identify tax evaders. According to Okafor (2019), electronic filing systems have helped to increase tax compliance in Nigeria.

Another impact of digitalization on tax administration in Nigeria is the use of digital payment systems. With the introduction of digital payment systems, taxpayers can now easily pay their taxes without visiting tax offices physically. This has helped to reduce the time and cost associated with tax payments. Using digital payment systems has also improved the accuracy of tax payments, reducing incidents of over or underpayments. According to Adeyemo (2020), digital payment systems have helped to reduce tax collection costs and increase tax revenues in Nigeria.

The use of digital technology has also enabled the creation of databases and information systems to help tax authorities monitor compliance and identify tax evaders. For instance, the Federal Inland Revenue Service (FIRS) has introduced the Integrated Tax Administration System (ITAS) to enhance tax administration in Nigeria. The ITAS system provides an integrated platform for the administration of taxes, including tax registration, filing, and payment. It also provides real-time access to taxpayer information, enabling tax authorities to monitor compliance with tax laws (FIRS, 2020). 

Challenges of tax administration in the digital age

The following are the challenges of digital taxation in Nigeria as observed by scholars.

  1. Lack of technical skills and infrastructure among tax officials to effectively implement digital taxation policies (Adesina & Adeleye, 2019). 
  2. Limited access to technology infrastructure and internet coverage in certain regions of the country (Ifeoma & Nwafor, 2021). 
  3. Difficulty in regulating and tracking tax compliance for businesses operating online (Onyia, 2021).
  4. Limited awareness and understanding of digital taxation among taxpayers and the general public (Bolarinwa et al., 2020). 


Technology is changing the face of taxation globally, and Nigeria is still in this digital transformation. The Nigerian government has introduced digital taxation to capture revenue generated in the digital economy. The concept of significant economic presence is one of the approaches used to achieve this goal. The Tax Promax project also shows the government’s commitment to improving tax administration through technology. The Nigerian government and stakeholders should continue to collaborate in implementing technology-based solutions for tax administration to ensure efficient and effective revenue mobilization. 


Based on the challenges enumerated above, the following are recommendations;

  1. Increase investment in training and developing the skills of tax officials in the area of digital taxation in order to ensure efficient implementation and enforcement. 


  1. Increase investment in technology infrastructure and improve internet coverage in underserved areas to ensure that taxpayers in these regions are not left out of digital taxation implementation.


  1. Implement digital tax reporting and payment methods which allow for real-time monitoring and regulation of businesses operating online, thus ensuring both transparency and fairness in taxation.


  1. Increase education and awareness efforts in order to promote digital taxation understanding among the general public.




  1. Adesina, F. A., & Adeleye, F. O. (2019). Digital Taxation and the Challenges of Implementation: A Study of Nigerian Tax System. Journal of Accounting and Financial Management, 5(2), 38-47. doi:10.11648/j.afm.20190502.
  2. Adeyemo, O. (2020). Taxation in Nigeria: The impact of digitalization. Retrieved from 
  3. Bolarinwa, O. A., Ogbonna, G. N., & Nweke, H. U. (2020). Digital Taxation in Nigeria: Issues, Challenges, and the Way Forward. Journal of Public Policy and Administration Research, 10(1), 1-10. doi:10.11648/j.pp ar.20190201.
  4. Federal Inland Revenue Service (FIRS) Establishment Act. (2007). Laws of the Federation of Nigeria. Retrieved from
  5. Federal Inland Revenue Service (FIRS). (n.d.). Tax Promax. Retrieved from
  6. Federal Inland Revenue Service. (2020). Integrated Tax Administration System (ITAS). Retrieved from 
  7. Finance Act, 2019. Retrieved from
  8. Finance Bill, (2022).
  9. FIRS V. GLOMO (MIRROR) NETWORKS LIMITED (2020) FWLR (Part 1081) 1239.
  11.  Ifeoma, O. W., & Nwafor, E. O. (2021). Impact of Digital Taxation on Taxation in Nigeria. Journal of Economics, Management and Trade, 27(1), 1-10. doi:10.9734/jemt/2021/v27i130310 
  12. Mauritius Commercial Bank Limited v. FIRS. (2019). Suit No. FHC/L/CS/1423/2018. 
  13. Nigeria Income Tax (Country-by-Country Reporting) Regulations, (2018). Retrieved from 
  14. Okafor, C. (2019). Taxation in Nigeria: The benefits and challenges of digitalization. International Journal of Accounting Research, 4(2), 36–45. doi: 10.11648/j.ijar.20190402.12 
  15. Olufunso Ola-Ojo and Olawale Soilenu, (18 Feb 2021). Nigeria: Significant Economic Presence And Taxation Of Non-Resident Companies In Nigeria. Retrieved from
  16. Onyia, D. O. (2021). The Implication of Digital Taxation on Revenue Generation in Nigeria. International Journal of Accounting Research, 8(1), 1-14. doi:10.11648/j.ijar.20210101.11
  17. SEP Order, 2020
  18. The Companies Income Tax (Amendment) Act


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