THE Federal Inland Revenue Service (FIRS) says it is exempting dealers of foodstuffs from the Value Added Tax (VAT) Direct, its proposed tax for traders in the informal economy.
The tax also excludes artisans from compliance.
Many Nigerians have expressed disapproval with the proposed tax, but a senior FIRS official had provided explanations on why the Service is focusing on the informal sector, which constitutes a large chunk of traders.
The FIRS Director of VAT, Loveth Ononuga, said on Thursday, June 6 that any trader whose turnover is below N25 million would not be affected by the initiative.
Ononuga said that those who trade in VAT-exempt goods are also excluded.
According to the Director, the initiative largely aims at expanding the tax net to those who are not formally registered and have not been paying VAT, according to the VAT Act.
She further said that VAT Direct targets dealers of electronics, textiles, gold, and “deep-pocket traders who may not have been captured in the tax net.”
She added that the VAT Direct initiative would enumerate traders, as “at the moment, we do don’t have the data of the business community in Nigeria.”
A World Bank figure had revealed that 80 per cent of the Nigerian business was informal, while only 20 per cent was formal.
Ononuga said, “We don’t know who makes up that 20 per cent. The VAT Direct is the foundation for building up that data bank to know exactly those who are the informal traders, and what they are dealing in.”
She emphasised the importance of gathering data in planning the economy, both in state and federal governments.
She said data capturing of marketers would enable the government to easily reach out to them on incentives, and on palliative interventions.
She posited that the scheme would help curb imposition of multiple taxes, and that there was actually a collaboration among stakeholders that would address this.
“Part of the focus of the VAT Direct is to reduce multiple taxation. You could see the FIRS partnering with the umbrella body of the Market Traders Association of Nigeria (MATAN) and law enforcement agencies.
“The VAT is a federal tax to be collected according to section 8 of the VAT Act, which states that all persons and individuals, whether incorporated or not, registered or not dealing in invertible goods and services in the country, must pay it, so the FIRS has the right to collect it,” she said.
The FIRS chairman, Muhammad Nami, who is also the chairman of the Joint Tax Board (JTB), is expected to collaborate with JTB and Market Traders Association of Nigeria (MATAN), which is the umbrella association of traders, to rid markets of touts posing as tax collectors in the drive to eliminate multiple taxes and illegal dues.
VAT-exempt goods include healthcare related equipment and services, medicines including for veterinary care but excluding cosmetology and fitness devices, spas, and gymnasium and similar services.
Harrison Edeh is a journalist with the International Centre for Investigative Reporting, always determined to drive advocacy for good governance through holding public officials and businesses accountable.