Tax experts in the country have called for integration of Artificial Intelligence (AI) in taxation as it would create user-friendly, efficient and effective tax system that benefits both tax payers and the economy.
The experts shared their opinions at the 6th edition of Blakey’s National Tax Conference which held in Lagos under the theme, ‘The future of taxation–the game changer: Transforming the informal sector through taxation.’
The experts were also of the opinion that taxing the informal sector would help build morale and culture of tax compliance in the country.
Speaking on ‘AI–powered taxation: a new dawn for the informal sector’, the convener of the conference who is also the founder and Managing Partner, Okwudili Ijezie & Co. (Chartered Accountants), Blakey Ijezie, affirmed that adoption of AI was crucial for corporations and individuals to remain relevant, and added that Africa, particularly Nigeria, is lagging behind in harnessing Artificial Intelligence’s potential.
He further said: “The adoption of AI in taxation presents opportunities such as automation of tax processes, enhanced data analysis and compliance, but also challenges like potential job displacement and the need for up skilling and reskilling.’’
For Ijezie, transforming the informal sector through taxation was a complex task adding that with Artificial Intelligence, it would be more efficient, effective and equitable.
Maintaining that Artificial Intelligence was a veritable tool for integrating the informal sector into the formal economy, he said: “The future of taxation was not about compliance, but collaboration, Artificial Intelligence would facilitate an era of cooperation between tax authorities, taxpayers and technology providers.’’
In his lecture titled, ‘Transforming and growing the informal sectors of MSMES through appropriate tax regime,’ Anthony Chinwe described Small and Medium Enterprises (MSMEs) as the engine of economic growth of nations, adding that their invaluable economic footprints are visible in all sectors of the economy at the base of economic pyramid.
According to him, vast majority of these business entities are not registered or captured by regulatory authorities.
This, he explained presents challenges to the planners of the economy in getting accurate statistics for planning and deriving commensurate tax revenue from the segment for fiscal activities of government.
“It is believed that appropriate tax model will incentivise these informal economic players to formalise their status by registering their businesses, joining trade associations and paying appropriate taxes,’’ he added.
Stating that there are 39.65 million MSMEs in Nigeria out of which 34.41 million operate informally, Chinwe said that such situation makes it impossible for the government to regulate and harness full benefits from them, particularly in terms of taxes.
He said: “Businesses in Nigeria pay taxes which comes in the form of market levies and may not funnel into official channels.
“Their biggest challenges include low profitability; limited access to formal credit, and poor business skills.
“In Nigeria, MSMEs contributed 46.31 percent of the national GDP and also accounted for 6.21 percent of gross exports. Micro Enterprises (MEs) accounted for 96.9 percent of businesses and 87.9 percent of employment.
“The downside of informal sector is that it encourages negative activities that result in the loss of revenue from taxes, weak unions, unfair competition, a loss of regulatory control, and disregard for health and safety standards, among others.’’
However, Chinwe identified some of the challenges faced by the sector in Nigeria to include; lack of access to suitable finance in terms of options.
Others were multiple taxes and levies, lack of coordination of federal and state agencies, and the absence of a central technology platform for the ease of payment of taxes.
To make the informal sector tax-compliant, Chinwe advocated the following: education and awareness, incentive and benefits, reviewing the constitution and tax laws, support infrastructure development, social dialogue and single tax authority.
In his opening remarks, Chairman of the occasion, former Executive Director of Federal Inland Revenue Services, Mark Dike, underscored the importance of taxation, saying it helps the government to provide meaningful and gainful employment to the teeming population as well as promote economic growth and development.
Join BusinessDay whatsapp Channel, to stay up to date
Open In Whatsapp