Nigeria may harvest an additional $2.5 billion annually in corporate tax from multinationals as the United Nations (UN) tax convention plans to scrap and replace a century-old approach which is expected to unleash new economic era without increasing taxes.
This was contained in a new report by Tax Justice Network that countries, including Nigeria, could capture an extra $500 billion a year without raising corporate tax rates following the UN’s move to dump the 100-year-old approach of “Pay-where-you-say” set up by the defunct League of Nations, requiring governments to tax multinational corporations’ profits based on where they declare them.
Under the century-old approach, multinational corporations have been robbing countries of billions in corporate tax every year.
India and Nigeria (Nigeria Tax Act 2025) have legislations to ensure that companies profiting from their economies should not escape the tax net just because they operate across borders.
The report noted that the UN tax convention’s commitment would replace this with a “pay-where-you-play” approach which taxes multinational corporations’ profits based on where they genuinely do business –where they employ their workers, and make and sell their goods and services.
This makes shifting profits into tax havens useless, since multinational corporations tend to employ little to no workers in tax havens, and almost all their goods and services are made and sold elsewhere.
The proposed approach is expected to be a major feature at the ongoing session of the United Nations Framework Convention on International Tax Cooperation, which runs between August 3 and 13 at the UN Headquarters in New York, United States.
The report established that countries altogether, including Nigeria would collect 24 per cent more corporate tax from multinational corporations without increasing their tax rates by modernising from “pay-where-you-say” to “pay-where-you-play”.
The new approach is to tax multinational profits where real economic activity happens – known as unitary taxation. No new profit is created, and revenue simply shifts from tax havens where profits are “booked” to the countries where workers produce and customers spend.
The change would mean multinational corporations would have to abide by the tax laws of countries they do business in for the first time in decades, and so the amount of tax countries collect from multinational corporations would effectively fast-forward several decades to catch up with and accurately reflect the higher levels of profits modern multinational corporations make today.
The biggest sums will be made in higher-income countries while the biggest impacts would be felt in lower-income countries, where the smaller sums would increase the amount of corporate tax the countries collect annually from multinational corporations several times over.
High-income countries would increase the corporate tax they collect from multinationals a year by 21 per cent, bringing in at least US$140 billion more in tax a year; upper-middle income countries would increase by 31 per cent, bringing in at least US$112 billion more.
Lower-middle income countries like Nigeria would triple the amount they collect, bringing in at least $61 billion more; low income countries would quintuple the amount they collect, raking in at least $3.6 billion more a year.
To further put the scale of tax revenue into perspective, countries that received grants from the US under the Marshall Plan to help rebuild post-war Europe, including the United Kingdom would collect the inflation-adjusted equivalent of what they received at the time every two years.
“India would collect $43 billion more a year, increasing its tax revenues from multinationals by 194%; Brazil $17 billion (+62%); South Africa $8.9 billion (+85%); Nigeria $2.5 billion (+641%); Kenya $1.3 billion (+406%); Jamaica $0.31 billion (+587%),” the report said.
The UN wants agreement on the newly- proposed tax approach by late 2027.
During last year’s UN Framework Convention on International Tax Cooperation, Donald Trump’s US walked, and urged others to follow, but none did.
Britain has belatedly backed a UN-led shift towards taxing real activity.
Analysts believe that while the United States can sit out the negotiations, it cannot shield American companies from others’ rules.
The success of these talks has largely been down to African nations insisting on consensus where possible and majority rule where necessary.
They believe that this would deny the United States and any rich-country bloc an effective veto.
Ndubuisi Francis
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