Douglas Kendyson, the founder of creator economy platform Selar, has publicly challenged the Lagos State Internal Revenue Service (LIRS) over a significant tax demand. He accuses the agency of misclassifying the company's revenue and imposing a backdated 5% royalty fee on all sales. This public confrontation places a prominent Nigerian startup in direct opposition to state tax authorities, highlighting growing pains in the nation's digital economy.
The Core of the Disagreement
The dispute centers on the LIRS's classification of Selar's income as royalties, which Kendyson vehemently refutes. He argues that Selar operates as a software platform, earning a commission of around 4% on transactions, not licensing intellectual property. This fundamental disagreement over the business model is the primary driver of the conflict, which has now escalated into the public domain.
Selar has demonstrated significant scale, paying out approximately ₦18 billion to its 400,000 creators in 2025 alone. Kendyson contends that imposing a 5% royalty fee would force the company to raise prices, unfairly burdening the very creators it supports. He frames the demand as a threat to the creative ecosystem and a form of double taxation on creators' earnings.
A Complex and Evolving Tax Landscape
This conflict unfolds against the backdrop of recent legal reforms, specifically the Nigeria Tax Act 2025. The act introduced a formal statutory definition of "royalty income," creating a new legal framework for digital businesses. Whether a platform's transaction commission fits this new definition is a matter of legal interpretation, not a settled issue.
Further complicating matters is a question of jurisdiction, as it remains unclear if LIRS is pursuing a federal company income tax or a state-level withholding tax. This ambiguity arises as LIRS's own public messaging has promoted partnership with the tech sector to modernize tax collection. The current standoff appears to contradict the agency's recent collaborative stance toward digital companies.
Implications for Nigeria's Digital Future
The Selar case is a bellwether for Nigeria's burgeoning digital and creative sectors, which the government aims to grow into a $100 billion industry. An aggressive tax enforcement approach that misinterprets new business models could stifle the innovation and entrepreneurship the government seeks to foster. This dispute underscores the tension between ambitious national revenue targets and the need for a supportive regulatory environment for startups.
Nigeria is not alone in facing these challenges, as other African nations have also struggled to apply traditional tax laws to modern digital platforms. The outcome of this high-profile case will likely set an important precedent for how e-commerce and software-as-a-service companies are taxed in Lagos. It will signal to the wider tech community how regulators intend to engage with the digital economy moving forward.
Ultimately, the resolution of this dispute between Selar and the LIRS carries weight far beyond the two parties involved. It represents a critical test of Nigeria's ability to balance robust tax collection with the nurturing of its innovative tech ecosystem. How this conflict is resolved will send a clear message about the future of digital enterprise in Africa's largest economy.