Chartered Institute of Taxation of Nigeria (CITN) has advised the Lagos State Internal Revenue Service (LIRS) to develop strategies on how to integrate the informal sector into the tax system.
Mark Anthony Dike, president, CITN, who made the call last week at the eighth annual Lagos State Taxation Stakeholders’ Conference, said such strategies will improve tax revenue generation from the sector “and also how to meet their specific needs as a means of encouraging compliance.”
Speaking further on the topic “Tax Compliance in 2015 and Beyond: Fiscal Imperatives of Utilisation of Internally Generated Revenue,” Dike said “we understand that tax authorities are facing numerous challenges in taxing the informal sector and its size is growing day by day.”
In his words, “the informal sector, also referred to as informal economy or in tax parlance ‘the-hard-to-tax-group,’ is the part of an economy that is not taxed, monitored or included in any National Gross Product, unlike a formal economy. The self-employed that belongs to the informal sector are outside the formal economy and generally are not on anyone’s payroll.”
In a related development, the CITN president noted that Nigerian tax laws do not predicate tax compliance on efforts of government in providing and caring for the citizens before they come forward with their taxes as with other climes.
“However, the social contract between government and taxpayers bind both sides in the interest of economic prosperity and development. Both parties must know their rights and exercise same responsibly,” the Institute’s president said.
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He further said: “For the taxpayers, calls for defunding of badly behaved government agencies that become an economic drag on the commonwealth should not sound out of place as government performance also constitutes part of the measurement yardstick for determining continued flow of resources from the hands of the citizens to the public coffers.”
The CITN president further said that while some governments, especially at the state level, had over the years, deliberately tinkered with their revenue mix for funding operations thereby insulating the operations of government from oil revenue volatility, to a large extent, others had left Nigerians asking the all too obvious question how we chose not to establish a marked departure of doing things differently after over 35 years since the last oil glut.
“The struggle is on to maintain a foothold on macroeconomic indicators which are basic rudiments to measure economic stability. The naira now exchanges for between N185 – N195/$1, depending on where the foreign exchange is being sourced. The nation’s foreign reserve is also not spared and it remains a matter of time before we see the contagious effect on interest rates and inflation rates as well. “In all, the nation’s revenue profile today looks bleak and dire such that it has developed different economic austerity gears in the form of scenarios, changes to which might impact positively or negatively, on the macroeconomic indicators,” Dike said.
