As part of a campaign by President Bola Tinubu's administration to increase the tax base, Nigeria's federal revenue agency said on Monday that it has teamed up with a merchants group to collect value-added tax (VAT) from millions of informal traders.
In a gamble by Tinubu to speed up slow development, Africa's largest economy has started its most ambitious reform program in decades, including the elimination of a popular gasoline subsidy and the unification of currency rates in the country.
The Federal Inland Revenue Service (FIRS) estimates that Nigeria's tax collection rate, which is around 10.8% of GDP, is among the lowest in the world. Only 47% of this year's budget will be funded by income; the remainder will be financed by borrowing, as reported by the American news agency, Reuters.
In a statement, the FIRS announced a partnership with the Market Traders Association of Nigeria (MATAN) to use a digital platform to collect and send VAT from its members, particularly those in the informal sector.
The agreement, according to the statement, will aid in "curbing the activities of touts, miscreants, and self-imposed tax collectors involved in illegal tax collection in Nigeria's market spaces."
According to MATAN, there are more than 40 million merchants, the bulk of whom work in Nigeria's informal economy, where most people make a livelihood.
A computerized platform would track MATAN members' earnings for tax reasons, according to the revenue office, and they would obtain identity cards with tax identification numbers.
A few weeks ago, it was reported that Nigeria's Value Added Tax (VAT) had increased by 1.75% from the fourth quarter of 2022 to the first quarter of 2023, going from N697.38 billion to N709.59 billion.
The National Bureau of Statistics issued its VAT Q1 2023 report, which included this information. The study also listed the industries that made the most contributions to the collection of VAT during this time, with manufacturing leading with 29.65%, followed by information and communication at 19.29%, and mining and quarrying at 12.24%.