To read the Part 1 on the series are bloggers expected to pay tax? Check the introduction here.
For all intents and purposes, taxation is a method used by governments to realize funds for the arduous task and cost of governance. It is the contribution of every citizen or corporate body into a collective pool that is needed for the exigencies and contingencies beneficial to both the government and the populace.
It is important that we as business owners and entrepreneurs know this.
Table of Contents
- 1 WHO AND WHO IS EXPECTED TO PAY TAX?
- 2 WHAT IS TAX COMPLIANCE?
- 3 BLOGGERS AND TAX
- 4 SHOULD BLOGGERS BE TAXED?
- 5 Let’s get to the difference between a professional and a Hobby blogger:
- 6 The following characterization helps to draw the line, however fine, between blogging for fun and making money out of it:
WHO AND WHO IS EXPECTED TO PAY TAX?
Basically, anyone who earns a taxable income and who enjoys the amenities provided by the government is liable to be levied a certain sum of money as tax. In Nigeria, all people who earn money, private people who do business, as well as expatriates who earn income from Nigeria as well as companies that operate in Nigeria are all taxable.
WHAT IS TAX COMPLIANCE?
The Federal Inland Revenue Service (FIRS) defines tax compliance as obeying provisions of tax laws willingly, without being forced.
It also encompasses registering oneself, an enterprise, NGO, or a government agency with the relevent tax authority and also keeping proper and accessible records and other financial statements. Aside being a civic responsibility, consistent payment of tax by affected entities maintains steady and sustainable national development by a responsive government.
BLOGGERS AND TAX
A blog is an online journal, sometimes a diary or informational website displaying information in the reverse chronological order, with latest posts appearing first. It is a platform where a writer or even a group of writers share their views on an individual subject. Blogging has become a business because:
- Blogging provides an easy way to keep your customers and clients up-to-date on what’s going on, let them know about new deals, and provide tips.
- Search engines love new content, and as a result, blogging is a great search engine optimization tool.
- A blog allows the operator to build trust and rapport with your prospects. Not only can one show off knowledge, building expertise and credibility, but because people can post comments and interact with the host, they can get to know him or her, and hopefully, will trust will be built enough to transact business.
SHOULD BLOGGERS BE TAXED?
The answer is YES and NO. We could look at this from the angle of the LAW and from the angle of the determination on the basis of what ‘mode’ of blogging is in perspective. The first question to ask is are certain bloggers hobby bloggers or professional bloggers.
Empirically speaking, bloggers and freelancers and webmasters and other people who offer specialized online services in different genres may be considered owners of their own businesses, and or people who get paid for using their talent and or acquired skill.
Bloggers and webmasters usually earn income from advertising and from selling their services. Other online professionals, such as virtual assistants, social media strategists, SEO specialists, content writers and website designers usually earn income from selling their services. In this case Bloggers may be considered as self-employed individuals.
It is true that in Nigeria, the Federal Inland Revenue Service is still battling with making e-commerce generally and blogging a taxable means of earning income – there are a lots of issues trying to establish whether blogging is seen as a hobby or as a professional means of doing business. But it is also important to note that bloggers do native advertising of company’s products. For example on Linda Ikeji’s blog, a lot of advertising is done for a lot of companies ranging from small businesses to multinational corporations who leverage on the traffic on her page to promote their business concerns. On that count, it will not be fair not to consider that a taxable income, since we have companies whose revenue are stemmed from advertisement itself.
Further, freelance writers and online professionals may argue that their services are immaterial and therefore cannot be taxed. A blog can be seen as a publishing company of some sort, just like a media house which owns print and electronic publishing platforms. In that case, the argument for it being taxable carries the day. Besides, there are offline strategic partnerships that ensue from just promoting a business, from where a blogger earns big.
There is also the direct advertisement angle of blogging. This is a complete taxable income and incurs some tax liability too.
So yes, bloggers are required to pay tax. But that isn’t all there is to it. there are few pertinent questions and clearances that are critical to the understanding of this discourse. And they include:
Let’s get to the difference between a professional and a Hobby blogger:
The truth remains that blogging is a painstaking, sometimes difficult venture that requires consistency, persistence, and hard research as well as passion. A lot of people consider blogging to be somewhat of a pastime, but there are levels when it crosses the line and becomes a full time and rewarding business. However, this takes time and nurturing.
In the Companies income tax act, Section 9:
Imposition of tax and profits chargeable
- Charge of tax
(1) Subject to the provisions of this Act, the tax shall, for each year of assessment, be payable at the rate specified in subsection (1) of section 40 of this Act upon the profits of any company accruing in, derived from, brought into, or received in, Nigeria in respect of‐
(a) any trade or business for whatever period of time such trade or business may have been carried on;
(b) rent or any premium arising from a right granted to any other person for the use or occupation of any property; and where any payment on account of such a rent as is mentioned in this paragraph is made before the expiration of the period to which it relates and is included for the purposes of this paragraph in the profits of a company, then, so much of the payment as relates to any period beginning with the date on which the payment is made shall be treated for these purposes as accruing to the company proportionately from day to day over the last‐mentioned period or over the five years beginning with that date, whichever is the shorter;
(c) dividends, interests, royalties, discounts, charges or annuities;
(d) any source of annual profits or gains not falling within the preceding categories;
(e) any amount deemed to be income or profit under a provision of this Act or, with respect to any benefit arising from a pension or provident fund, of the Personal Income Tax Act;
(f) fees, dues and allowances (wherever paid) for services rendered;
While this may be seem confusing to a lot of bloggers out there, simply put this explanation this way, income tax will be levied on any form of trade or business for as long as the business has been carried on over years.
Therefore it is important to ascertain whether business transactions are being consummated, services are being provided, direct advertisement are being done from an blogging platform. This can be used to address the issue on whether a blogger is an hobby blogger or a professional blogger cum business owner.
The following characterization helps to draw the line, however fine, between blogging for fun and making money out of it:
- Hobby bloggers do it mainly for fun and leisure, not necessarily for the money, although money can also come in through Google Adsense and traffic, but it will be limited. On the other hand, business bloggers want to make money through it.
- Hobby bloggers don’t have specific area of specialization when it comes to topics, but professionals usually focus on niches where they feel more comfortable to blog about, like lifestyle, sport, health, entertainment, politics, etc.
- Hobby bloggers don’t need to bother about SEO (search engine optimization) since they only blog for personal sentiments and getting huge traffic is not their concerns. On the other hand, professionals must engage in SEO to attract huge population of visitors to their blogs, which in turn can be utilized to make profits.
- Hobby bloggers really don’t have business with competitors or those in similar blogging styles. But a business blogger must conduct in-depth analysis on his rivals in the field for two major reasons;
- To find out their strategies in driving traffic to their sites,
- To discover the exact hubs they source their backlinks from,
- To know how they effectively engage their audience and visitors.
- Hobby bloggers are not consistent in updating their blogs but professionals cannot escape consistency except they are ready to lose their audience.
- Hobby bloggers do not involve in direct advertisement, all they just want to do is pass information across, and build a loyal gathering to make money later in their blogging career. Please note that as soon as you move from just updating blog posts to meeting other business owners for services and business transactions, there is the potential for exposures in terms of tax.