CPPE kicks against collection of VAT from informal sector

By Ibiyemi Mathew

The Centre for the Promotion of Private Enterprise (CPPE) has kicked against the planned move by the Federal Inland Revenue Service (FIRS) to tax the informal sector.

The Federal Inland Revenue Service (FIRS) had earlier revealed plans to commence digital taxation of market traders in the informal sector.

The FIRS disclosed this in a statement stating that it is partnering with the Market Traders Association of Nigeria to collect and remit VAT from their members especially those in the informal sector using a unified systems technology.

Reacting to this development, the CCPE through its Director/CEO, Dr Muda Yusuf has cautioned against the decision of the FIRS to undertake VAT collection in the informal sector.

The CPPE stating its reasons for revolting against the planned policy said, “The economics of collection does not support the move.  The cost of collection would be much more than the amount that could be collected.”

“Over 98 per cent of the informal sector traders are microenterprises who do not fall within the threshold of entities that are liable for VAT payment.

“The informal sector associations are highly fragmented. It would be impractical to develop a partnership framework with the market associations for the collection as contemplated by the FIRS.

“Most informal sector operators have not recovered from the shocks of the fuel subsidy removal and the associated inflationary impact.

“Most informal sector operators have no records which could be used for purposes of assessment. There is therefore a high risk of arbitrary assessment.

“The literacy level of the operators in the sector is very low which would create communication issues.The political cost to the government will be very high.

“Most informal sectors are already paying all manner of levies to local governments, and several non-state actors. The government need not burden them with additional taxes.”

The CPPE urged the FIRS to “think of more creative ways of taxing the informal sector players in ways that will be more cost effective, less disruptive and with minimal political cost.”

The CEO also advised the revenue agency to “adopt the pareto principle of focusing on the few players and individuals that could give the highest revenue yield.”

“This is a model appropriate for an economy with high level of inequality like ours,” he stated.