VALUE ADDED TAX (VAT) AND DIGITAL SERVICES IN NIGERIA: IMPLEMENTATION CHALLENGES AND COMPLIANCE ISSUES

Abstract

The study examined implementation challenges and compliance issues associated with Value Added Tax on digital services in Nigeria. The specific objectives were to assess the major challenges affecting the implementation of VAT on digital services in Nigeria; evaluate the factors influencing taxpayer compliance with VAT on digital services in Nigeria.The research adopted a survey design and focused on a population of 4,668 Nigerian Revenue Service staff, from which a sample size of 368 was derived using the Taro Yamane formula. A snowball sampling technique was used to select respondents, and data were collected through structured questionnaires designed on a Likert scale. Data were analyzed using descriptive statistics such as frequencies and mean scores, while a one sample t-test at a 5 percent level of significance was used to test the hypotheses. The findings indicated that: implementation challenges such as inadequate digital infrastructure, limited technical capacity, and poor internet connectivity have a significant effect on the administration of Value Added Tax on digital services in Nigeria (M = 3.51, t = 12.758, p = 0.000). Also, taxpayer compliance with Value Added Tax on digital services is significantly influenced by factors such as ease of use of digital platforms, timely notifications, trust in online systems, simplicity of filing procedures, availability of online support services, and quick processing of tax clearance certificates (M = 3.55, t = 12.365, p = 0.000).The study concluded that improving administrative capacity and enforcement mechanisms would enhance VAT compliance since strengthened institutional frameworks and improved access to tax information would result in better implementation outcomes. Thus, the Nigeria Revenue Service should strengthen the capacity of its digital tax infrastructure by investing in more stable systems and improving internet connectivity support for its operations, as this will reduce disruptions and enhance the efficiency of VAT administration on digital services.