Lagos: An Information Technology (IT) expert says the recent decision by OpenAI to implement a 7.5 per cent Value Added Tax (VAT) on ChatGPT subscription will possibly have a dual-edged impact on the economy.
The Chief Executive Officer, Jidaw.com, Mr Jide Awe, made this known on Lagos on Monday.
AWE said that while the move aligned with Nigeria’s efforts to enforce its digital tax laws, it raises significant concerns about the affordability of essential AI tools for students, young innovators, and startups.
He said that, on the one hand, the application of the 7.5 per cent VAT demonstrated Nigeria’s successful enforcement of its digital tax laws.
According to him, it requires foreign digital service providers without a physical presence to register, collect, and remit VAT.
“The decision ensures tax equity, compels foreign providers to pay VAT just as local businesses do, thereby broadening the government’s revenue base from international digital services.
“This compliance effectively asserts Nigeria’s taxing rights over foreign companies and aligns the country with the global ‘Destination Principle’ where consumption tax is paid where the service is consumed.
According to him, OpenAI is not unique in implementing this regulatory imperative, which has been in effect for years.
He said that major global tech platforms, including Google, Meta, Netflix, Amazon, and Zoom, are already complying, and that Nigeria is reportedly collecting significant VAT revenue from these digital giants.
Awe, however, noted that the tax introduced a direct cost barrier for consumers, making paid digital services, including premium AI tools like ChatGPT Plus, about 7.5 per cent more expensive.
The IT expert said that this price hike posed a serious threat to AI and digital adoption, particularly for price-sensitive segments of the population.
He said that the added operational expense may compel some freelancers and startups to pass the cost on to their clients, thereby reducing their competitiveness in local and international markets.
According to him, moreover, the economic pressure is likely to force many users to seek out free alternatives.
AWE said it would create a clear gap in access to the latest, most powerful models and advanced tools, thereby widening the technology and education gap.
He said that a shift to alternative AI platforms or a reversion to free versions is considered highly likely for businesses operating on low margins.
“The dual and opposing impacts of the VAT suggest a need for a creative and inclusive approach from the government,” he added.
As we said, while the tax eliminated the advantage previously enjoyed by non-resident foreign service providers, creating a more level playing field for local competition, the government must strategically reinvest the new tax revenue.
“If the revenue generated is efficiently used to improve critical infrastructure and to fund local innovation, it will be good.
He said that digital taxation could then become a net positive for national development, ensuring that local development and grassroots innovation will not be stifled.
