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Press Release - ActionAid Nigeria's Position On Nigeria’s Reluctance To Sign Onto The Organisation For Economic Co-Operation And Development Tax Deal

For Immediate Release

17th July 2021

ActionAid Nigeria's Position On Nigeria’s Reluctance To Sign Onto The Organisation For Economic Co-Operation And Development, OEDC Tax Deal

ActionAid applauds that the OECD recognises the need to better tax the digital economy and the fact that big tech companies need to be making bigger tax contributions. However, ActionAid Nigeria supports the reluctance of the Federal Republic of Nigeria to sign onto the OECD global tax reform deal.

The deal consists of two parts:

  • Pillar 1:  states that if a company has a global turnover of more than 20bn euros and a profit margin of more than 10%, then 20-30% of the profit in excess of 10% of revenue will be allocated to market jurisdictions using a revenue-based allocation key. A multilateral agreement will be developed and opened for signature in 2022 to implement pillar 1, with a view of the multilateral agreement being in force from 2023 onwards. The agreement can then be reviewed earliest 7 years after its implementation (i.e., earliest in 2030).
  • Pillar 2: sets a global minimum tax rate of (at least) 15%. It will only apply to companies with a global turnover of more than 750m euros. The minimum tax will work as a sort of ‘top up’ tax that can be charged in the country where multinational company is resident for tax purposes. So, if a company pays 2% corporate income tax in a foreign jurisdiction (such as a ‘source’ country where they have operations or a tax haven that they are shifting profits through), then the jurisdiction has the right to tax the remaining 13% (i.e., 15%-2%=13%). In other words: this give additional taxing rights to the country where a company is headquartered, not where they do business.

Tax rates are not just for collecting taxes, but they are also fiscal tools to improve the Domestic Resource Mobilization of any country. This is more significant in the current global financial crises where the global Foreign Direct Investment (FDI) is at the 15-year lowest. The global FDI peaked at about $2 trillion in 2015, but between 2019 and 2020, it crashed with more than 50% to less than $1 trillion from the global economy.[1] The reduction in global FDI is also on the backdrop that the average Corporate Tax Rates have reduced from 40% in 1980, to 24% in 2020. This forces countries from the global south to struggle for more income to fund their budget deficit. In Nigeria, tax regimes are dependent on the benefits the countries are bound to gain. The gains may be to maximize tax collection or maximize FDI inflow. However, the current global minimum tax of 15% is a threat to both gains.

Nigeria set up rules and regulations with the corporate tax at 30% for big and multinational companies. The average Corporate Tax Rate for African countries is 28%. However, the 15% minimum corporate rate is too low and therefore inadequate to stop the 'race to the bottom’. The benefits of a proposed minimum tax will be far below what is expected to fund the budget deficit in Nigeria, which will translate to the country's inability to meet up with the fight against poverty and unemployment. For a moderate stand, Nigeria, like most other African countries will need the global minimum tax rate to stand between 25% to 30% above the 21% as initially proposed by the United States.

To corroborate this, an independent study by the Independent Commission for the Reform of International Corporate Taxation (ICRICT) found that, for some selected global southern countries of Brazil, South Africa, and India, only an average of $1 billion will be collected as cooperated taxes from the 15% tax rate. However, at 25% global minimum corporate tax, the earning of these countries is projected to double or triple in some countries, While more than ninefold in others. Brazil could generate up to $9 billion, South Africa could generate $3.65 billion, while India could generate $1.83 billion. Therefore, sticking to 15% will not give Nigeria or other developing nations the fair share of their taxation[2]. The global rate of 15% is too low and cannot significantly reduce profit shifting from the region[3].


ActionAid Nigeria is displeased with the negotiation carried out by rich countries for their benefit. The deal calls for all countries to remove their unilateral measures to tax the digital economy, such as digital services taxes, and replace them with the new rules laid out in pillars 1 and 2. It is fundamentally unfair to ask countries in the global south to trade-off their unilateral taxation of the digital economy, in lieu of implementing a deal they were not part of negotiating, coupled with the fact that they will only marginally benefit from it.

The fact that this new deal will take effect earliest in 2023 and cannot be reviewed until earliest 2030 is not good enough. Revenues are desperately needed in the global south to tackle the challenges posed by the covid19 pandemic and to fight poverty and inequality. Companies operating within the digital economy need to be compelled to pay their fair share of taxes.


ActionAid Nigeria agrees with the concerns expressed by the African Tax Administration Forum (ATAF) who immediately after the publication of the new deal, stated that ‘political pressure should not be brought on countries to apply these rules.’

ActionAid Nigeria recognizes and welcomes progressive moves by the Federal Republic of Nigeria to put in place unilateral measures to tax the digital economy through the Finance Act of 2019 and Significant Economic Presence Rule of 2020. We call on the Federal Republic of Nigeria to maintain these measures until an acceptable and beneficial deal is met. Nigeria should also restrain from signing Tax Treaties indiscriminately as they may have same effects as the deal.

While the new deal is disappointing, it underlines the need for more comprehensive reforms of the international tax practices and treaties. Such reforms are expected to give countries in the global south equal voices in the process of negotiating international tax rules through e.g., a possible United Nations Tax Body. This will also give increased rights to countries in the global south to effectively tax digital companies operating within their jurisdictions.

In conclusion, the current OECD Tax deal is neither beneficial to the country as a tax rate or FDI attractor. The worst concern about it is that it can only be reviewed in the next seven years. Hence, it is better for Nigeria and any developing nations to stand away from ratifying it, the unilateral measures imposed through the Finance Act of 2019 and the Significant Economic Presence Rule of 2020 stand to be more beneficial.



Editors' notes

ActionAid Nigeria (AAN) is a national non-governmental, non-partisan, non-religious, civil society organization, and an affiliate member of the ActionAid International Federation with presence in 45 countries. AAN works in solidarity with people living in poverty and exclusion to achieve social justice, gender equality and poverty eradication towards achieving a just, equitable and sustainable world in which every person enjoys the right to a life of dignity, freedom from poverty and all forms of oppression.


Lola Ayanda - Communications Coordinator ActionAid Nigeria

Tel: +234(0)7037766155   Email: |