The Fiscal Policy Partner and Africa Tax Leader at PwC, Mr Taiwo Oyedele, stated that market traders under the VAT Direct Initiative will have exemptions if their business does a turnover of less than N25 million.
He disclosed this on Tuesday during an interview with Nairametrics, discussing the new Valued Added Taxes initiative between the FIRS and the Market Traders Association of Nigeria (MATAN).
He also disclosed that this would enable both the state and federal governments to the needed information and data gathering of the informal sector.
He revealed that the law is not new, but what matters is the implementation of the new partnership. Speaking further, he said:
“I am not sceptical about the timing, it’s important to clarify that this is not a new tax, no law introduced a new tax on traders, it has always been in place and how to implement it.
“It is also instructive to note that this was an agreement between FIRS and MATAN (traders association), which means it was not forced on them and they decided to be part of it.”
On exemptions, he added that in terms of details, it has VAT exemptions for traders with business turnovers of less than N25 million per annum, adding:
“MSMEs and traders are more than 90% of businesses in micro space, so they won’t have to charge VAT, and there are also exemptions for basic food items, for example, a trader selling rice, beans, and notebooks for primary school would not have to be charged VAT. The sweet aspect is why the FIRS agreed to it, is because the traders are paying all manners of taxes in the informal sector, who extort them every time.”
He revealed that what the FIRS is doing is using the Federal might to ward off tax collections by non-state actors and stop them from extortion and pay VAT where applicable.
“This is good for traders so they pay less, and this can help federal and state with economic data for planning and ultimately have the informal sector become more formalized into the economic system.”
What you should know
Recall Nairametrics reported that The Nigerian Government through the Federal Inland Revenue Service, FIRS, announced the VAT Direct Initiative, a scheme that would enable FG to collect Value Added Taxes from the informal sector and reduce multiple taxations in the informal economy.
The FIRS disclosed this in a statement on Monday afternoon, stating that the FIRS is partnering 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, 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.”
Download Nairametrics App for breaking news and market intelligence.