Can CAC Tax Content Creators?

Can CAC Tax Content Creators?
By Timi Olagunju

In the evolving digital landscape of Nigeria, a recent statement by the Registrar General of the Corporate Affairs Commission (CAC), Hussaini Magaji, has sparked a significant conversation about the regulatory framework governing content creators and their tax obligations. The call for social media influencers, Instagram users, and TikTok users with large followings to register their businesses under the Company and Allied Matters Act (CAMA) 2020, reflects an increasing interest from regulatory bodies in the economic activities generated through digital platforms.

However, this raises critical questions about the capacity of the CAC to enforce tax compliance, its understanding of its role vis-a-vis the digital sector, and the broader implications for digital entrepreneurs in Nigeria.

Firstly, it is essential to clarify the legal boundaries within which the CAC operates. The CAMA 2020 does mandate the registration of businesses operating within Nigeria; however, its jurisdiction does not extend to enforcing tax compliance or collection.

If CAC understands the overall content creation space, it will clearly understand it cannot force a content creator who is work for hire to register a business name or sole proprietorship – any coercive act is unconstitutional. Infact, they do not need to register as their income can fall under personal income. Registering as a business name does not guarantee tax will be paid [we know that already].

Additionally, taxation, especially in the context discussed by Magaji, falls within the purview of the Federal Inland Revenue Service (FIRS) and state governments for personal income taxes. Precisely, the FIRS has articulated that its mandate does not include taxing individual content creators directly, as highlighted in an article by The Cable, where it was stated that there are no plans by the FIRS to tax content creators directly. The FIRS maintains that it focuses on corporate entities and businesses with significant profit margins, leaving individual creators largely within the taxation oversight of state governments.

The distinction made by the FIRS underscores a critical aspect of Nigeria’s tax system, emphasizing the decentralized nature of personal income tax administration. This clarification not only alleviates immediate concerns among content creators about potential new tax burdens but also illustrates the nuanced understanding required to navigate the digital economy’s regulatory landscape. FIRS stance is both the legal and pragmatic position to take, considering Nigeria’s current realities [perhaps CAC can learn from them].

Although, in some developed digital economies, where government has invested in growing innovation and with increased digital economy activities such as Singapore, if you are involved in repeated or habitual blogging-related activities result in an annual net business income of more than $6,000, you will have to declare this as self-employed income, you do not have to register as a business by compulsion. Nigeria in the future can learn from this, but for now, FIRS position is pragmatic and viable.

Regarding Opay’s role in this unfolding scenario, the company’s engagement with the CAC, aiming to regularize 300,000 agents and merchants, is a monumental task that underscores the fintech giant’s commitment to formalizing the informal sector. However, the communication and government relations strategy surrounding these efforts needs critique.

The portrayal of Opay’s involvement in facilitating business registration and potentially expanding the tax net could inadvertently align the brand with an “anti-people” sentiment, especially if perceived as enforcing unpopular regulatory measures without adequate public sensitization or dialogue.

To mitigate such perceptions, Opay, and indeed any fintech or digital platform operating in similar capacities, must prioritize transparent, empathetic communication that highlights the mutual benefits of compliance and registration.

The rule is: “Have your GR comms materials ready for release before and after each visit, do not leave it in the hands of government and media [especially some Nigerian media outlets that tends to sensationalize headlines]. Not only does this approach foster a more cooperative relationship between digital platforms and their users, but it also positions these companies as partners in progress, working alongside government agencies to enhance economic inclusiveness and stability.

In addressing the complexities of digital economy regulation, the role of the 14-member National Council for Digital Innovation and Entrepreneurship (NCDIE) becomes paramount. Inaugurated by President Muhammadu Buhari under the Startup Act, with the Vice President serving as its head, the NCDIE is strategically positioned to influence these matters significantly.

The council consists of a diverse group of stakeholders, including representatives from federal ministries such as Finance, Digital Economy, and Education, as well as members from the private sector, academia, and the startup ecosystem. This composition ensures a holistic approach to digital innovation and entrepreneurship, enabling the council to provide comprehensive guidance and support on regulatory issues that impact digital content creators and the broader tech community.

The NCDIE’s involvement is crucial in ensuring that regulations like those proposed by the CAC and tax considerations by the FIRS are pro-innovation and align with the overarching goals of fostering a supportive environment for digital innovation and entrepreneurship in Nigeria. The NCDIE must wake up the sleeping giant in her!

 

Timi Olagunju has 12+ years experience in the intersection of technology, law, and policy. He is a Partner Groundswell and Associate Partner, The Timeless Law Practice. He tweets @timithelaw