The Federal Inland Revenue Service (FIRS), the agency of the federal government saddled with the responsibility to assess, collect and account for tax and other revenues accruable to the federation, has announced it will partner with the Market Traders Association of Nigeria (MATAN) to collect taxes from market traders and players in the nation’s informal sector.
MATAN was founded in 1995 and it is the umbrella body for all trading associations in Nigeria. The body is said to have about 40 million traders across the country.
The latest move to rev up Nigeria’s VAT revenue may not be unconnected with the fact that 98 percent of Nigerians within the informal sector pay their taxes annually, according to the findings of SBM Intelligence only that the majority of such taxes do not end up in either federal or states’ coffers.
According to the research outfit, 98 percent of players in the informal sector pay taxes. Out of that number, 54 percent earn between N2100 to N5000 daily, while 38 percent of those informal taxpayers earn N5000 and above daily, adding that some pay as much as between N24,000 to N36,000 as taxes annually.
“The findings of this study clearly showed that the tax base of Nigeria is much larger than thought, but much of it is in the informal sector. These taxes, to a great extent, are not captured in any official records at state or federal level, reflecting the inability of the state to properly project itself, leaving the door open for other actors to come in and secure relevance. When Nigerians are asked why they do not pay taxes, they say it is because they get no services from the government.
“However, the entities that collect various levies from bus drivers, okada riders, hairdressers and vulcanisers, do not deliver much in terms of benefits either. It should, therefore, prompt a rethink of what really ensures higher tax compliance in a state, namely the credible threat of sanctions, up to and including violence,” SBM Intelligence stated in 2021.
Accordingly, the new FIRS and MATAN initiative aligns with the campaign promises of all the presidential candidates to block revenue leakages.
“The FIRS is partnering with MATAN to collect and remit Value Added Tax (VAT) from their members-especially those in the informal sector-using a unified systems technology. This collaboration is known as VAT Direct Initiative,” FIRS stated.
VAT Direct Initiative “Is a collaboration between FIRS and MATAN where MATAN promotes awareness of VAT collection and remittances in the market place and informal sector, while also simplifying VAT payment and remittances for the market place and informal sector using a purpose-built digital platform,” FIRS added.
According to FIRS, this initiative will help reduce multiple taxation in the market place due to the involvement of security agencies that will curb the activities of touts, miscreants as well as other self-imposed tax collectors in market places in Nigeria.
The scheme involves a monitoring and evaluation team made up of FIRS and MATAN members whose responsibility is to ensure transparency, accountability and prompt VAT remittance towards building public confidence in the initiative.
Nigeria recorded noticeable progress in VAT collection in the last five quarters starting with the first quarter of 2022 when the nation generated N588.59 billion as VAT revenue.
VAT revenue accruable to the nation rose by 2 percent to N600.15 billion as of June 2022. With an increase of 4.2 percent over the second quarter of 2022, Nigeria realised N625.39 billion as of September 2022.
The nation also generated N697.38 billion during the last quarter of 2022, representing an increase of 11.5 percent over the performance recorded at the end of the third quarter of last year, thus bringing the total VAT in 2022 to N2.51 trillion.
VAT revenue generation further improved as of March 2023 when Nigeria realised N709.59 billion representing a 1.8 percent increase over the performance of the fourth quarter of 2022, and a 20.6 percent increase compared to the performance as of the end of Q1 2022.
