Economy
DR Taiwo Oyedele, Fiscal Policy Partner and Africa Tax Leader, PriceWaterHouseCoopers, has lauded the Value Direct Initiative (a tax scheme) of the Federal Government and called for safeguards to prevent abuse upon implementation.
Oyedele made this known in a statement on Tuesday in Lagos.
The News Agency of Nigeria (NAN) reports that the Federal Government through the Federal Inland Revenue Service (FIRS) on Monday announced the scheme — Value Direct Initiative.
The scheme will allow government to collect Value Added Tax (VAT) from the informal sector, inclusive of traders, in collaboration with the Market Traders Association of Nigeria (MATAN).
The tax expert stated that the social contract between government and the people required every taxable person to pay their taxes, while government must apply the revenue collected for the benefit of the people.
He, however, noted that a national tax perception study indicated that Nigerians had a very low tax morale.
He revealed that the study showed that only 17 per cent of individuals and 31 per cent of businesses believe that they should pay their taxes correctly.
Oyedele said the initiative by the FIRS was therefore commendable, as it sought to bring the mostly informal sector traders under the MATAN umbrella into the formal tax net.
According to him, the initiative will also help the traders to ward off the menace of multiple taxes and extortion often by non state actors.
He, however, stressed the need for proper education to ensure that the traders know their rights and are not exploited by tax officers.
“Ultimately, the biggest win for government from this arrangement may not be the VAT but the tax awareness, data about the traders and their trades which can be used for economic planning and possible interventions to support the informal sector businesses.
“This should include simplified record keeping to help them access finance and scale their business.
“One of the reasons Nigerians gave for the low tax morale is lack of trust in government, lack of commensurate fiscal exchange for taxes paid and corruption in tax administration.
“Government needs to address these issues for the initiative to truly work.
“FIRS also needs to work with various states similar to their arrangements with Lagos State to ensure that the traders who are not in the tax net for personal income tax purposes do so, subject to the income tax exemption of N360,000 per annum as provided under the law,” he said.
He added that the scheme would cover many of the traders not exempted by the N25 million turnover threshold of the VAT Act such as basic food items, medical products, baby products and educational materials.
Oyedele said for those not covered by any of the above exemptions, they would be liable to charge and remit VAT at 7.5 per cent on their sales.
“However, they are eligible to claim input VAT on their purchases such that the 7.5 per cent VAT is effectively charged only to their margins.
“For instance, if a trader buys an item for N1,000 and sells it for N1,200; the incremental VAT cost to charge to the customers is N15 i.e. 7.5 per cent of N200 margin.
“The combined effect of the above means that the public should not be exploited either by the traders who may use this VAT arrangement as an excuse to hike their prices.
“The VAT should not apply to over 90 per cent of the traders, and for those who need to charge the VAT, the impact should be about one to two per cent of the sales value, if not less.
“In fact, the traders should pay less “tax” overall if government can stop the illegal taxes the traders currently pay as a sweetener for the VAT pact,” he said.(NAN)
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– July 05, 2023 @ 07:06 GMT |
Tags: Dr Taiwo Oyedele FIRS PriceWaterhouseCoopers Value Added Tax
