Following the Corporate Affairs Commission (CAC) and the Federal Inland Revenue Service (FIRS) announcement of new regulations to register and monitor Content Creators operation in accordance with the Company and Allied Matters Act (CAMA) 2020, many have wondered how exactly they will go about taxing a video that goes viral. The CAC clarified that its main objective is to ensure compliance with CAMA 2020, which stipulates that all businesses, regardless of whether they are operated by an individual or a corporation, must be officially registered with the commission. The CAC argues that registering and taxing content creators will help expand the Tax threshold, encourage new business ventures, and create more job opportunities for Nigerians.
Nevertheless, many people strongly oppose the concept of taxing creativity. Recall that the FIRS had in January revealed an objective to boost Tax Revenue by 15% in 2024, aiming for ₦19.4 trillion. It intends to shift its focus from oil to non-oil sectors, particularly emphasizing the digital economy. Nigeria stands out as a vibrant hub of online innovation, churning out a wide array of content including Comedy skits and music. With the thriving digital economy making up 3.8% of its total GDP, the nation’s Social Media sub-sector is valued at $3.4 billion.
67% of media industry workers are not contributing to taxes.
The FIRS is aiming for a substantial increase in non-oil Revenue to help the current administration reach its goal of an 18 percent tax-to-GDP ratio within the next three years. Taxing content creators seems to be a common practice, with the World Bank advising governments to implement tax systems that are progressive and suitable for the modern digital era. For instance, content creators in the United States are required to pay income and self-employment taxes, regardless of whether they are creating content as a hobby or as a full-time occupation. The IRS classifies content creators as self-employed individuals and mandates that they disclose their earnings and costs on Schedule C.
Taxing creators helps ensure that all workers in the Digital Economy are treated equally, regardless of their job status. PricewaterhouseCoopers (PwC) reports that as of 2019, the entertainment and media industry in Nigeria employed 1.2 million individuals, with only 0.4 million in formal jobs. This means that approximately 67% of the industry’s workers are not contributing to taxes, resulting in revenue deficiencies for the government and unequal treatment among employees. Inequity arises when a radio station, bringing in millions from ads, pays taxes but a successful YouTuber making the same is not held to the same standard. This disparity erodes the idea of everyone contributing to Finance public programs.
Dealing with creator income information can pose difficulties.
At the same time, monitoring and taxing content creators pose distinctive obstacles in comparison to conventional industries. Creators have various revenue streams, such as advertising, sponsorships, merchandise sales, direct payments, platform rewards, and cryptocurrency, unlike employees who receive regular salaries. Complying with tax regulations and protecting privacy while dealing with creator income information can pose difficulties. The CAC’s classification of creators as businesses suggests they may be required to register and pay a 30% company Income Tax (CIT).
Meanwhile, the FIRS, the sole agency authorized to collect taxes in Nigeria, specifies that it mainly collects corporate income tax rather than taxing individuals directly. Individual creators may be subject to state-level personal income tax, which is set at 24% for those making more than ₦30 million per year. Moreover, the legal landscape surrounding business registration is ambiguous under CAMA 2020. The law primarily addresses companies and partnerships, with the CAC advocating for registration of all business activities, including those by individuals.
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However, the definition of what constitutes a business in this context is still uncertain. Additionally, past experiences with the CAC’s inefficient regulatory practices have led to doubts about the efficacy and possible drawbacks of its proposed strategy. As online content becomes increasingly popular among Nigerians for entertainment, information, and potential income opportunities, many wonder if the Nigerian system is equipped to embrace this evolving practice. Taxing content creators on a global scale remains intricate and constantly changing due to the continuous evolution of the digital economy.