An Evaluation of the Challenges of Double Taxation on Cross-Border Trade: A Study of Nigerian Exporters
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Background of the Study
Cross-border trade is essential for economic growth, particularly for developing economies like Nigeria. Exporters in Nigeria play a crucial role in contributing to the nation’s revenue through the sale of goods and services to international markets. However, the issue of double taxation presents significant barriers to the success and competitiveness of Nigerian exporters. Double taxation occurs when a product or service is taxed in both the country of origin (Nigeria) and the destination country, increasing the cost of trade and potentially reducing profit margins.
For Nigerian exporters, double taxation often leads to an increased financial burden, complicates their pricing strategies, and can reduce their ability to compete in global markets. Several factors contribute to double taxation, including differences in tax policies, lack of tax treaties with some trade partners, and the inability to access tax credits or exemptions that would reduce the overall tax burden.
While Nigeria has entered into several Double Taxation Agreements (DTAs) with its trading partners, these agreements may not always provide adequate relief or may be difficult to implement due to bureaucratic inefficiencies and lack of awareness among exporters. Moreover, the complexity of tax systems in both Nigeria and the countries to which goods are exported often leaves Nigerian businesses vulnerable to double taxation.
This study aims to evaluate the specific challenges faced by Nigerian exporters in dealing with double taxation and the implications for their cross-border trade activities.
Statement of the Problem
Nigerian exporters face substantial challenges related to double taxation when engaging in cross-border trade, which limits their profitability and reduces the attractiveness of Nigeria as an investment destination. While Nigeria has signed multiple Double Taxation Agreements (DTAs) with trade partners, these agreements are often underutilized or poorly enforced, resulting in exporters still being subjected to taxation in both Nigeria and their partner countries. Furthermore, exporters may face difficulties in obtaining tax credits or exemptions due to complex compliance requirements and a lack of clarity in the application of tax treaties.
The issue of double taxation remains a significant obstacle to expanding Nigeria’s export potential, and a thorough evaluation of its challenges is needed to provide recommendations for improvement.
Objectives of the Study
- To identify the main challenges Nigerian exporters face in relation to double taxation during cross-border trade.
- To evaluate the impact of double taxation on the competitiveness of Nigerian exporters in global markets.
- To assess the effectiveness of existing Double Taxation Agreements (DTAs) in addressing the challenges of double taxation for Nigerian exporters.
Research Questions
- What are the main challenges Nigerian exporters face with regard to double taxation in cross-border trade?
- How does double taxation impact the competitiveness of Nigerian exporters in global markets?
- How effective are the existing Double Taxation Agreements (DTAs) in reducing the tax burden on Nigerian exporters?
Research Hypotheses
- H0: Double taxation does not significantly affect the challenges faced by Nigerian exporters in cross-border trade.
- H0: Double taxation does not significantly reduce the competitiveness of Nigerian exporters in global markets.
- H0: The existing Double Taxation Agreements (DTAs) do not significantly reduce the double taxation burden on Nigerian exporters.
Scope and Limitations of the Study
The study will focus on Nigerian exporters and their experiences with double taxation in cross-border trade, analyzing the period from 2020 to 2025. Limitations include the difficulty in obtaining specific data from exporters regarding their tax liabilities and compliance, as well as challenges in assessing the effectiveness of DTAs due to the lack of comprehensive enforcement mechanisms.
Definitions of Terms
- Double Taxation: The taxation of the same income or assets by two or more countries.
- Exporters: Businesses or individuals involved in the sale of goods or services to foreign markets.
- Double Taxation Agreements (DTAs): Treaties between two or more countries designed to prevent or alleviate the problem of double taxation on income or capital.
- Cross-Border Trade: The exchange of goods and services between businesses in different countries.
- Competitiveness: The ability of a company to compete successfully in the global marketplace.
