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The Executive Chairman of the Federal Inland Revenue Service (FIRS), Mohammed Nami, has said that tax administrators need to tax street traders, artisans and other jobs in the informal sector of the economy but politicians are frustrating the effort.

According to Nami, taxing the informal sector promotes good governance and political accountability, ensuring the informal sector has the right to request for certain services as demanded by the formal sector, which is being taxed.

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“Taxing the informal sector may also be a way of promoting good governance and political accountability of the State because tax strengthens the social contract between the citizens and the government. Thus, informal businesses that contribute to tax revenues are likely to assert their rights to receive certain services from government thereby ensuring accountability,” Nami said.

The informal sector is not taxed in Nigeria. Individuals and businesses in the informal sector also known as an underground sector do not declare their income and pay no taxes on them because it is not considered as normal income sources. The sector is mostly filled with the lower class of society.

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But the FIRS boss is trying to change that in a bid to expand the government’s revenue base. Nami disclosed this during the ninth Country Correspondents meeting and African Tax Administration Forum (ATAF’s) Experts meeting on taxation of the informal sector in Abuja.

[READ MORE: Finance act: VP outlines how FG plans to capture multinational firms in tax net)

His statement came at a time President Muhammadu Buhari’s administration is trying to create more revenue sources to find a solution to Nigeria’s dwindling revenue. Finance Minister Zainab Ahmed had stated that Nigeria has a revenue problem, so in Nami’s view, taxing the informal sector will be a boost to the revenue mobilisation of African countries.

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Why are Politicians against it? According to Nami, the fear of losing votes is causing politicians to thwart the tax administrator’s intention to tax the informal sector. He said politicians have promised the people in the informal sector of protection from taxes in order to be elected.

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Nami said, “Taxing the informal sector is viewed as politically unpopular and politicians are unwilling to risk losing the high number of votes represented in the sector. This is because politicians promise informal workers protection from taxation in exchange for their votes.”

He added that these businesses “also operate on a cash basis and maintain poor or no accounting records. Most of the businesses in the sector are also small and fragmented making it inefficient for the revenue administrations to enforce compliance.”

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16 COMMENTS

    • I agree with you. One of the main basis for taxation is recompense for support provided by the government (representing the society) to business success, such as adequate security, good roads and road network, development of alternative & affordable transport systems, reliable electricity supply, water etc. But It is a known fact that most big businesses in Nigeria are currently providing most of these infrastructures on their own albeit at very high costs. However, while the medium to large organisations may not complain about the tax burden because they can spread the high costs over the huge quantities of products, customers or clientele that they command, the same cannot be said of very small scale businesses which make up the bulk of the informal sector. These businesses often fail at very high rates mainly due to the high cost of providing their own electricity and water, as well due to theft resulting from poor security, damages to goods in transit (can’t afford insurance) and high transportation costs resulting from poor road network. Therefore taxing this group without first providing the needful, is tantamount to extortion.

      • Well said and good reply Firs will be looking at the area that is not necessary in order to make good money for their pay masters forgetting the stress the ordinary Nigerians pas through in their daily hustling, all the Ecowas member states have fixed their road but Nigeria is still struggling with decayed and Rotty roads and FIRS won’t see the need to remind government about it, electricity, Rifinary, and government own satellite/ internet which all will give good number of Nigerians employment and move our economy forward FIRS won’t see those areas repair so that it will help federal government to generate money i don’t know who do us sha.

    • I thought this guy when he was appointed recently was marketed and appointed as a tax guru who has the magic wang. His predecessor was considered a poor performer. Why is he complaining so soon. There is nothing new in politicians preventing taxing informal sector.Get down to work man. That’s your job.

  1. To tax the informal sector is okay but the argument that it will promote the social contract is not true. For years the transport systems at all levels have been paying all manner of taxes, rates and levies with no clear benefits to the transport operators directly. Rather, we have super rich agberos and state governors who use them to win elections and commit all manner of crimes in their states.
    Let us strengthen the payment systems in Nigeria, force an ecosystem approach to financial inclusion and it will become very easy to apply very robust consumption based taxes for the good of our land.
    We hope that we can apply the benefits of a solid financial inclusion systems into other social sectors, tap into the gains of a digital economy, enlighten population and promote evoting to elect credible leaders through a very clean electoral process built on the best technology.

  2. The informal sector is already being taxed by the state and local government with their revenue drive. Now the federal government wants their own share. That’s completely insane and unfair. Am yet to see the benefits of taxation especially when it comes to basic amenities. Good road, pipeborne water, constant electricity the Government can’t boast of providing for it’s citizens talk of security. We pay taxes to fund the useless politicians and their greed.

    • Well said and good reply Firs will be looking at the area that is not necessary in order to make good money for their pay masters forgetting the stress the ordinary Nigerians pas through in their daily hustling, all the Ecowas member states have fixed their road but Nigeria is still struggling with decayed and Rotty roads and FIRS won’t see the need to remind government about it, electricity, Rifinary, and government own satellite/ internet which all will give good number of Nigerians employment and move our economy forward FIRS won’t see those areas repair so that it will help federal government to generate money i don’t know who do us sha.

  3. do politicians pay taxes?
    all the money collected by agberos, local government and state government from the informal. what have they benefits from it.

    is only in nigeria that we have those elected to manage resources, only taking care for themselves and their families and they are government to the people by taking from them.
    while the citizens provide everything for themselves. you take complaints about the police they will charge you for either fuel or something else before they attend your complaint.
    if you don’t generate your power supply then darkness is your kingdom. if you don’t build a home of your own then you must pay heavily to roof over you.
    water is provided by you. road is not available, transportation is zero, education is death, health care is not available yet taxi is being charged.

    come and collect it

  4. I thought this guy when he was appointed recently was marketed and appointed as a tax guru who has the magic wang. His predecessor was considered a poor performer. Why is he complaining so soon. There is nothing new in politicians preventing taxing informal sector.Get down to work man. That’s your job.

  5. This is an idea that you are not suppose to conceive. Because carrying out such action only adds to the ridiculous position in which we are already in, economically. We the salary earners are the once that will always be on d receiving end so please, Look for another avenue because it’s really really bad already.DONT MAKE IT WORSE.

  6. Tax, Tax, Tax,..
    Nigerians cannot be paying and the rulers be looting, we the Nigerian people want to see the value for our money. Let the FIRS transparently, give a comprehensive utilization of the money we are paying. You can’t rob Paul and pay Peter. We want to see our market modernized and befitting for our market women, let’s have good roads, portable water, electricity and good housing for all, functional health care centers, Good schools for our children, Jobs for Nigerians etc,. We want to see value for the money. You can’t just force things down on Nigerians without us knowing exactly what we stand to get. That in itself is evil.
    Tell us what we stand to benefit first and how you implement the plan and who is in charge and what happen when nothing is done.
    By then people will pay willingly.

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