Every country has several categories of tax or levy imposed on its citizens. One of such is the value-added tax (VAT). VAT, which is known in some countries as a goods and services tax (GST), is a type of tax that is assessed incrementally and levied on the price of a product or service at each stage of production, distribution or sale to the final consumer. In other words, as goods are produced, manufactured, and distributed for sale, the government charges a fixed percentage in tax on them.
So, in Nigeria, when goods are bought, it is assumed that VAT has already been paid on them and the burden moved to the final consumer. This is why it is known as an indirect tax. The entity who pays it to the government is not necessarily the one who bears the burden. VAT is usually charged and noticeable in the formal sector such that they are charged on meals bought at restaurants, items bought at the mall, and luxury products such as alcohol and wines.
Details of partnership disclosed at Stakeholders Engagement Programme.
However, the Federal Government of Nigeria has announced its plan to extend the tax net to the informal sector. The Federal Inland Revenue Service (FIRS) has announced a partnership with the Market Traders Association of Nigeria (MATAN) to collect and remit value-added tax (VAT) from their members using a unified systems technology. This is focused majorly on the informal sector. The collaboration is known as the VAT Direct Initiative. It aims to promote awareness of VAT collection and remittance in the marketplace and in the informal sector.
Also, it aims to simplify VAT payment and remittance for the marketplace and informal sector using a purpose-built digital platform. The FIRS will collaborate with MATAN to deploy technology to enumerate traders for collecting and remitting VAT to the Service. Consequently, this will lead to an expansion of the tax net and increased revenue for the Federal Government. There are more than 40 million trader-members of MATAN spread over the 774 local government areas which make up the 36 states and the Federal Capital Territory (FCT).
Problem of double taxation will be addressed.
At the stakeholder engagement meeting, the executive chairman of the FIRS and chairman of the Joint Tax Board (JTB), Mr. Muhammad Nami, underscored the fact that this initiative was the first of its kind and significant for FG’s revenue generation and elimination of multiple taxations especially in the informal sector. The FIRS said it will partner with security agencies to curb the activities of louts and self-imposed tax collectors. Nami also stated that the government is worried about the multiplicity of taxes and that the Service and JTB were working on various modalities of addressing this challenge.
He also said that this partnership has laid a very good foundation for the government to address the issues. “One important area of our collaboration is the issue of providing adequate security in the markets. We are aware of the challenges that you have faced in the past with miscreants, self-imposed tax collection agents, and touts,” he said. He assured all stakeholders that the agencies will partner with the Nigeria Police Force to tackle all forms of louting and illegal tax collection by miscreants.
Success of this initiative will provide FG with needed resources.
Mr. Nami further noted that the success of the collaboration would lead to increased revenue for the country, and provide the government with the needed resources to fund infrastructure and other social amenities. To ensure transparency and accountability in the project’s operations, a joint monitoring and evaluation team comprising representatives from both the FIRS and MATAN will be formed. There will also be an identity card, which contains tax identification numbers and other personal information, and which will be issued to each trader upon enumeration.