This is a good policy provided the introduction of the VAT Direct Initiative will phase out fees, levies and other forms of indirect taxation for the informal sector: “The Federal Inland Revenue Service (FIRS) has announced a new move by the Nigerian government to introduce Value Added Tax in the informal sector, through a scheme dubbed VAT Direct Initiative. The federal tax agency said in a statement on Monday that the government aims to also use the VDI to curb multiple taxations in the sector.”
In FUTO, there was this General Studies course ( I think GST 201, Nigeria, Africa and Development) which provided a bombshell on my understanding of taxation. The professor had asked about the largest source of revenue for the federal government. People, my local understanding was oil and oil; I had just picked some skills after a 3 month internship in NNPC at Moscow Road, PHC, with the illusion that oil was funding everything in Nigeria. But here, the professor was all about Taxation.
Years later, and making it to America, I encountered a revelation: people willingly pay taxes because taxes are working in their lives. In other words, you are happy paying taxes because you can see the evidence of taxation. The same thing happens when you take a car for mandatory inspection, knowing that someone is tasked to check that car for road-worthiness, at least once in a year. You are happy to do that despite the cost because the government is helping you to avoid a potential problem. Indeed, you feel good paying that mechanic for that job even though a part goes to the government.
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For FIRS, it needs to ramp up the numbers to boost Nigeria’s revenue. For Nigerian citizens and their ventures, they need to see that tax works in their lives and communities. Across many indicators, both are far apart right now.
The question now is how do you bring both together? I propose one thing: have a website where MDAS (government agencies and ministries) will make public how they spend the people’s money with minor exceptions for national security. If we have that level of transparency, Nigerians and their companies will come along. So, I put this one on the government to show uncommon openness, and riding on that, will challenge even the informal sector to pay VAT because technically VAT is the government’s money to start with!
Indeed, challenge the people and let’s get back to the age of Mbakwe, Rimi and Jakande when Nigerians sent cheques to their governors to develop their communities. Then, government was working in those communities!
Comment on Feed
The federal and state governments have their separate taxing powers. Introducing VAT does not mean that states will be minded to scrap their taxes and levies.
— Dominus (@ichbin_Mexy) July 3, 2023
My Response: The irony is that if federal and state come together, there may not be a need for the extra the state is collecting since a bulk of the VAT goes back to the state. I know that LGA and state get more than 60% of total VAT. What that means is that VAT could have covered all those LGA and states levies, and fees. I am not a tax expert but I know the federal government does not keep 100% of VAT.
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What is our common goal as a people: make the government richer or empower the people? You may think that both are the same or not mutually exclusive, but at our current stage of development, both are mutually exclusive, and it’s something we have not been able to comprehend.
It is always great discussing how government can attract more revenues, but to what end exactly, and at whose expense? This misguided notion of why government exists is why we keep moving from one mess to another.
We lack purchasing power, yet we are arguing about VAT and why we should pay more, you are essentially asking very poor people to bring more, it’s both weird and unconscionable. We lack imagination, and never strong on innovation, so we only go for petty things to raise money, it’s extortionate and ignoble.
A responsible government should only immerse itself in how to make the land super attractive for investment, and positioning for more taxes won’t give you that. We do not have much to boast of, so we should be thinking more of what could make people prefer Nigeria to every other place on earth. When you achieve that, infrastructure will improve, more people will earn better pay and pay tax, and more formal businesses capable of VAT will rise.