The Executive Chairman of the Federal Inland Revenue Service (FIRS), Mohammed Nami, has said that street traders, artisans and others in the informal sector of the economy should be taxed.
He however, lamented that politicians were dragging their feet over the issue for fear of losing votes.
According to Nami, taxing the informal sector would promote good governance as well as political accountability, and also ensure the informal sector has the right to request for certain services as demanded by the formal sector, which is being taxed.
“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,” the FIRS boss 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 made this known during the ninth Country Correspondents meeting and African Tax Administration Forum (ATAF’s) Experts meeting on taxation of the informal sector in Abuja.
Nami posited that taxing the informal sector will be a boost to the revenue mobilisation of African countries especially Nigeria which has owned up to having revenue problem.
He said politicians have promised the people in the informal sector of protection from taxes in order to be elected.
“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.”
