Over the past few of years, the Nigerian sports betting sector has progressed from an underground phenomenon to a mainstream enterprise, a development that is also being seen in Ghana. As sports betting has grown in popularity, it has drawn the attention of investors and entrepreneurs from all around the globe.
Many people have discovered a gold mine in Nigeria and are quickly expanding their operations, with mind-boggling amounts being thrown about. While it may come as a surprise that the Nigerian Federal Inland Revenue Service (FIRS) levied a 7.5 percent tax on Value-Added Tax (VAT) on betting activities in the country, when you factor in the 3 percent tax levied by the National Lottery Regulatory Commission (NLRC) on gross gaming revenue (GGR), the total tax levied in the country is 10.5 percent. This is nevertheless regarded to be a modest rate of taxation when compared to Ghana’s 18.5 percent tax rate.
This recently imposed levy in Nigeria and Ghana has proven to be a source of contention among parties. However, the sector continues to see significant development and has developed into a significant source of revenue for the government, as well as a source of employment and opportunity for ordinary Nigerians and Ghanaians. The government must carefully develop a regulatory framework that takes into account the interests of both investors and players. We have seen that regulatory bodies inside the gambling business are competing for relevance, which may endanger the industry’s long-term viability and development.
A study of Value Added Tax (VAT) in selected nations in West Africa (Nigeria and Ghana) has been compiled by Velex Advisory to aid in the knowledge of industry players.
Value-added tax (VAT) is a levy on goods and services that is collected in stages by businesses. It is a broad-based tax that is often intended to cover the majority of products and services, if not all of them. The only amount that producers must pay the government is a tax on their sales that is more than the tax they must pay the government on their purchases used for intermediate consumption or capital creation. In most cases, VAT is not levied on sales to non-residents (that is, on exports) (definition by OECD).
JURISDICTION FOR NIGERIAN VALUE ADDED TAXES (FIRS VIEW)
In accordance with the Value Added Tax Act Cap V1, LFN 2004 (as modified), VAT is a consumption tax paid when products are bought and services are provided, with the ultimate consumer bearing the burden of the multi-stage taxation system. While all products and services (whether produced inside the nation or imported into the country) are taxed, with the exception of those expressly exempted by the VAT Act, it is important to remember that the current rate in Nigeria is 7.5 percent.
CASE STUDY OF THE GHANA VALUE ADDED TAX JURISDICTION (GRA VIEW)
The Ghana Value Added Tax (VAT) is regulated by the VALUE ADDED TAX ACT 2013, which translates as follows: Value Added Tax (VAT) is a tax levied on products and services based on the value added at each step of the production and distribution chain. VALUE ADDED TAX ACT 2013 It is included in the final price that the customer pays for the products or services that he or she purchases. The typical VAT rates vary from 12.5 percent to 17.5 percent. The following are additional levies: When comparing, the Standard Rate of Value Added Tax (VAT) is 12.5 percent. Ghana Education Trust Fund (GETFund) = 2.5 percent of GDP, whereas the National Health Insurance Charge (NHIL) = 2.5 percent of GDP (this levy does not qualify for input tax deduction) (this levy is not subjected to input tax deduction).
The COVID-19 Health Recovery Levy (COVID-19 HRL) is one percent of the total COVID-19 budget (this levy is not subjected to input tax deduction).
The Imposition of VAT on Sports Betting Applications in the U.S.
Following an examination of the VAT rates in both nations, we can conclude that both countries use the same technique of collecting value-added tax on products and services. We, on the other hand, are skeptical of the newly imposed 7.5 percent VAT on GGR (Gross Gaming Revenue) for sports betting businesses in Nigeria, which we believe is excessive. A clerical example was given in a case at the Tax Appeal Tribunal decision of the court case of Tourist Company of Nigeria PLC versus Federal Inland Revenue Service on the 17th day of February, 2021, in which the court case was decided. The difference between stakes and wins is used to calculate the value-added tax on gross gaming revenue (GGR); VAT may only be imposed on the excess of stakes over winnings. Otherwise, it is negative since the stakes are inclusive of VAT. As a result, betting businesses are saddled with VAT in order to maintain their competitiveness. The Federal Inland Revenue Service (FIRS) receives 7.5 percent of gross receipts (FIRS).