What the Lagos State’s New Tax on the Digital Economy Means for Remote Workers, Freelancers, Influencers, and Content Creators

Now that most jobs can be done from anywhere, everything else is rapidly evolving. Lagos State Government is taking bold steps to keep up. Recently, the government announced a new initiative to tax digital workers-– particularly those working remotely, freelancing, or creating content online. The reason for this move is to boost Lagos state’s Internally Generated Revenue to N5 trillion.

But what does this mean for you if you're part of this digital workforce? Let’s explore the potential impacts, opportunities, and how you can prepare to make the most of these changes.

Understanding the Eko Revenue Plus Strategy

The Eko Revenue Plus Summit, planned for the 25th and 26th of September, 2024 will address revenue challenges and opportunities on how to unlock an additional N2.73 trillion in revenue for the state. In the synopsis document shared ahead of the summit, one of the strategies the government will be exploring is tapping into four major sectors: the digital economy, property industry, circular economy, and informal sectors. 

For the digital economy, a key component of this strategy is the introduction of a Resident Global Digital Citizen Tax Management System. This system is part of the revenue pipelines expected to generate N200 billion annually from remote workers for foreign firms, freelancers, gig workers, digital influencers, etc.

Simply put, if you’re earning money as a remote worker or content creator in Lagos, this tax will directly affect you. 

Why Is Lagos State Introducing This Tax?

Lagos is Nigeria’s economic powerhouse, contributing significantly to the nation's GDP. The digital economy in Lagos alone has grown between 20-25% annually. The government recognises that this sector holds vast untapped potential and sees it as a vital source of revenue to support the state's development.

The revenue collected from these new taxes will be channelled into critical areas such as education, healthcare, infrastructure, job creation, public transportation, and overall well-being, making Lagos a better place to live and work.

What This Means for Remote Workers, Freelancers, Content Creators, and Influencers

For remote workers and freelancers, especially those who work with clients abroad, this new tax system means that, just as regular employees have their taxes deducted at the source and remitted to the Lagos State Internal Revenue Service (LIRS), digital workers will also contribute to the state's revenue.

The government’s plan also includes creating a Content Aggregation Platform—a gateway where content creators can submit their work, and users can easily access curated content. This platform is intended to be monetized through various models such as subscriptions, advertising, and premium features. 

This new structure might open up new avenues for income generation, access to larger markets, higher visibility, and better monetization opportunities for content creators and influencers.

Is This Feasible?

One of the burning questions since the announcement is whether this new tax regime is feasible, especially given the unique nature of digital work. Many remote workers and freelancers feel unfairly targeted, especially those who already comply with existing tax obligations. Additionally, content creators, some of whom see their work as a side hustle or informal, might struggle to adapt to these new requirements.

The goal should be to create a balanced environment where everyone contributes to the state's development while also benefiting from the improvements funded by these revenues.

What to Expect and How to Prepare

As the Eko Revenue Plus Summit approaches, more details will emerge on how these new measures will be implemented. For now, it’s important to stay informed and proactive. Here are some steps you can take as a remote worker, freelancer, or content creator to position yourself for success:

1. Upskill and Stay Competitive: Continue to develop your skills and stay ahead in your field. By increasing your value, you can command higher rates, which can help offset any additional tax obligations.

2. Incorporate VAT into Your Pricing: Consider adding Value-Added Tax (VAT) to your services. This way, the tax burden is transferred to your clients, and you can maintain your income levels without absorbing the cost of the new tax yourself.

3. Explore New Revenue Streams: With the government's focus on the digital economy, now is a great time to explore new income sources, such as online courses, digital products, or premium content subscriptions.

4. Stay Compliant and Informed: Keep an eye on developments. Understanding the new regulations and how they apply to you will be key to staying compliant and avoiding any surprises down the line.

Looking Ahead

The introduction of this tax system marks a significant development in how Lagos State is embracing the future of work. While change can bring challenges, it also presents opportunities for growth, innovation, and increased recognition of the digital economy’s contribution to the state.