All you need to know about FIRS plan to collect VAT from market traders using tech

Godfrey Elimian
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The Federal Inland Revenue Service (FIRS) has announced a partnership with the Market Traders Association of Nigeria (MATAN) to collect & remit value-added tax (VAT) from their members—especially those in the informal sector—using a unified systems technology.

The collaboration which is known as the ‘VAT Direct Initiative’ aims to promote awareness of 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.

The details of the FIRS’ partnership with MATAN were disclosed yesterday at a Stakeholders Engagement Programme on the VAT DIRECT Initiative, held in Lagos State. The partnership will see the FIRS collaborating with the association to deploy technology to enumerate traders for collecting and remitting VAT to the Service, consequently leading to an expansion of the tax net and increased revenue for the Federation.

All you need to know about FIRS's plan to tax market traders using tech
Executive Chairman, FIRS, Muhammad Nami, delivers his remarks at the stakeholder engagement meeting with Market Traders Association of Nigeria (MATAN) in Lagos. 21st June 2023.

With more than 40 million traders as members spread over 774 local governments, 36 states, and the Federal Capital Territory (FCT), MATAN occupies a prominent place in the Nigerian market and is one of the biggest players there.

Tackling double taxation in Nigeria’s informal sector

During the Stakeholder Engagement, Mr Muhammad Nami, Executive Chairman of the FIRS, emphasized that this initiative was the first of its kind and crucial for revenue generation, as well as eliminating multiple taxations, particularly in the informal sector. In doing this, the service said it will partner with security agencies to curb the activities of touts and self-imposed tax collectors.

“The Initiative is the first of its kind that will utilize technology to foster collaboration between the FIRS and the marketplace for the collection and remittance of VAT.”

Muhammad Nami, Executive Chairman of the FIRS

The Executive Chairman of FIRS who is also the Chairman of the Joint Tax Board (JTB) further stated that the government is worried about the multiplicity of taxes and that the Service and JTB were working on various modalities of addressing this challenge. He also said that this partnership has laid a very good foundation for the government the issues.

One important area of our collaboration is the issue of providing adequate security in the markets. We are aware of the challenges that you have faced in the past with miscreants, self-imposed tax collection agents, and touts,” he said.

I want to assure you that as part of this initiative, we will be collaborating with the relevant security agencies particularly the Nigeria Police Force to tackle all forms of touting and illegal tax collection by miscreants and keep them away from your markets”, he added.

Mr Nami further noted that the success of this collaboration would lead to increased revenue for the country, and in turn, provide the government with the needed resources to fund infrastructure and other social amenities.

The successful outcome of this collaboration and additional revenue accruable will have multiplier effects on all sectors of the economy as the government will have more revenue to provide the needed social amenities and infrastructure in critical sectors.

An improved VAT collection will improve the revenue base of the States and Local Governments at the sub-national level and the citizens will be the ultimate beneficiaries. This initiative is very important to the government, particularly at this moment of dwindling revenues from the petroleum sector and therefore, requires that we put all hands on deck and optimally explore all available opportunities.

The administration of VAT in the informal sector is characterized mainly by a low level of compliance and a lack of awareness in terms of obligation and liability. It, therefore, becomes necessary to leverage the MATAN platform to positively change the status quo,” Mr Nami stated.

How FIRS will ensure VAT remittance

To ensure transparency and accountability in the project’s operations, a joint monitoring and evaluation team comprising representatives from both the FIRS and MATAN will be formed, as announced by Mr Nami during the stakeholders’ engagement.

The FIRS Executive Chairman also revealed an Identification Card at the occasion. This card, which contains tax identification number and other personal information, will be issued to each trader upon enumeration.

The VAT Direct Initiative Stakeholder Engagement was attended by the Secretary of the Joint Tax Board, representatives from Deposit Money Banks, Iyalojas of Markets across the country, members of various trade clusters, representatives from major markets nationwide, and officers of the Federal Inland Revenue Service.

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