The Executive Chairman of the Federal Inland Revenue Service (FIRS) Alhaji Mohammed Nami has accused politicians of frustrating efforts to the informal sector of the economy.
He spoke yesterday with reporters during the ninth Country Correspondents meeting and African Tax Administration Forum (ATAF’s) Experts meeting on taxation of the informal sector in Abuja.
He said: “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.”
Such businesses he lamented “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.”
However, ATAF is meeting to design ways to drag the operators of informal businesses into the tax net.
To support the planned capture of the informal sector into the tax net, Nami said: “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.”
Paying taxes he said is likely to promote responsiveness by the state to the needs of the informal sector in a bid to encourage voluntary compliance. It is also likely to encourage collective action, collective political engagement and bargaining by the informal sector.
Nami said if Africa is to reduce its budget deficits and increase revenue mobilisation, it must widen its tax base and the informal sector provides the opportunity to do so.
“Today the world is gathering over this period to discuss how to tax the digital economy. Nigeria is a massive market, e-commerce and social media platform is widely used in this country and it is widely used in other continent, mobile cellphone is the biggest on the continent and so what does that mean for revenue and for economic activity, because now companies can do business in our countries without having a presence here.”