The government of Nigeria has announced a plan to collect Value Added Taxes (VAT) from the informal sector and reduce multiple taxation.

Development Diaries reports that the Federal Inland Revenue Service (FIRS), in a statement, said it would partner with the Market Traders Association of Nigeria (MTAN) to collect and remit VAT from their members, especially those in the informal sector, using a unified systems technology.

Through the VAT Direct Initiative, the FIRS seeks to help tackle multiple taxations in the marketplace through partnerships with security agencies to curb the activities of touts and self-imposed tax collectors.

Taxes should be one of the main sources of income for a government system, and the money generated used for citizens’ welfare and general well-being.

However, there is a need to thoroughly look into the menace of illegal taxation in the informal sector before additional taxes are imposed by the government.

A variety of unlawful organisations harass people to collect unreported levies in the street, in parks, markets, and shopping centres.

According to an investigation conducted by the International Centre for Investigative Reporting (ICIR), the Lagos branch of the National Union of Road Transport Workers (NURTW) alone produces roughly N123.08 billion in levies and unlawful taxes each year on just passenger cars, motorbikes, and tricycles.

The investigation revealed that not a single penny of this revenue goes into government coffers.

Aside from that, there is the huge illegal taxes collected from hawkers, market women, articulated trucks, and small traders displaying their wares on roadsides.

A report by Business Day noted that the spate of formal and illegal taxation on the informal players in the economy, especially small-scale market traders, bus or Okada riders, is tremendous, such that they pay between 30 and 50 percent of their day’s earnings to these taxes.

This is a pointer to the fact that the informal sector in Nigeria already pays taxes most times as much as half of their daily earnings.

Development Diaries calls on the President Bola Tinubu-led federal government to tackle the issue of illegal taxation in Nigeria before imposing more taxes on players in the informal sector.

The government should also be reminded that once it begins to widen the tax net, it will come with a greater demand for accountability.

Photo source: Zouzou Wizman