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.

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.

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.

To achieve its aim, the agency said it will partner with the Market Traders Association of Nigeria (MATAN) to collect & remit VAT from their members especially those in the informal sector using a unified systems technology.

“This collaboration is known as VAT Direct Initiative,” the FIRS said.

“A collaboration between FIRS and MATAN where MATAN promotes awareness on VAT collection and remittance in the marketplace and informal sector, while also simplifying VAT payment and remittance for the marketplace and informal sector using a purpose-built digital platform.”

The FIRS indicated that it is counting on the huge membership of MATAN to ensure that the VDI succeeds.

The 28-year-old association has more than 40 million members, making it the largest player in Nigeria’s informal sector, according to the statement.

The initiative will utilize MATAN’s digital platform to enumerate its members, giving them a digital ID card and tracking their turnover so that VAT accrued is collected and remitted to the FIRS. MATAN members will each receive an ID card upon enumeration, which would contain their Tax Identification Number and other personal details.

“The Initiative is the first of its kind that will utilize technology to foster collaboration between the FIRS and the marketplace for the collection and remittance of VAT,” the FIRS said.

The agency said the use of digital technology will among other things, help to tackle multiple taxations in the marketplace. It added that it will partner with security agencies to curb the activities of touts and self-imposed tax collectors.

“This will also boost VAR revenue generation for the three tiers of government, which in turn means more money to fund infrastructure and social amenities,” it said.

However, the announcement has riled up Nigerians, who have decried the speed with which President Bola Tinubu’s government is expanding the tax net. The new tax regime is coming simultaneously with other policies that include; the removal of fuel subsidy and the floatation of the forex market, which have orchestrated a jump in the cost of living.

The federal government last week announced a Proof of Ownership Certificate for vehicle owners across the country. The POC comes with an N1,000 levy, which is seen as an additional tax to the Nigerian public already being suffocated by multiple taxations.

“This tax is retrogressive. It is ill-conceived and poorly designed. Apart from the payment which seems to be solely for revenue generation and perhaps more for non-state actors than for the government…” Taiwo Oladele, PwC Nigeria tax executive.

“The tax adds complications to the myriad of multiple taxes which make doing business difficult and dampens tax morale.”

Critics believe that imposing VAT on the informal sector, which is also reeling from the negative effects of the recent policies, will compound Nigerians’ harsh economic situation.

Good People,  first, our sites are back. Yes, we launched a new edition of Tekedia Mini-MBA to begin Sept 11 to end Dec 2, 2023, along with an affiliate program, the traffic crashed our school and the affiliate portals. Thank you so much for your interest in what we do; truly appreciated.

We also thank Amazon for sending us $100,000 free AWS credit as further support on what we do in the community; thank you Amazon for the support.

Let me also apologize to our learners who started Tekedia Investment & Portfolio Management program and Tekedia Venture Investing & Portfolio Management program today for the site downtime.

To all our Affiliate members, we’re crediting everyone N10,000 which you can cash out on your first redemption. Team has promised to get all the Welcome emails within the next 12 hours. I welcome all to the Tekedia community. Get your friends, associates, and everyone to co-learn with us at Tekedia Institute. More affiliate members wanted https://hub.tekedia.com/ and in this July, everyone gets a N10k bonus.