Bringing informal sector to tax net will tackle budget deficit, boost revenue — FIRS chairman

Mr Muhammad Nami, the Chairman, Federal Inland Revenue Service (FIRS) says bringing the informal sector to the tax net will tackle budget deficit and increase revenue in the country and Africa.

Nami said this at the 9th African Tax Administration Forum’s (ATAF) Country Correspondents Conference and Experts meeting on Taxation of informal sector in Abuja on Tuesday.

He explained that those that constituted the informal sector were huge and could contribute significantly while paying their taxes, thereby addressing budget deficit in Nigeria and other African countries.

Nami, also the chairman of ATAF said it was estimated that the informal sector in Africa constituted between 21 to 70 per cent of Gross Domestic Product (GDP) of African countries.

According to him, with the above figure, the sector accounts for between 30 to 90 per cent of employment and revenue generation.

The chairman said that in spite of the large size of the informal sector, it was the most difficult to tax.

He added that most of the businesses operating in the sector were concealing their activities from tax authorities wherever they operated.

Nami said such businesses also operated a cash risk and maintain a poor and no accounting records, adding that most of those businesses were small and fragmented which made it inefficient for revenue administrators to enforce compliance.

“Taxing the informal sector is also critical because it will ensure that there is a perception of fairness in the tax system.

“Those who operate in formal sector view it as unfair that they are paying taxes while those in the informal are not. Those in informal sector use infrastructure built with the formal sector taxpayers’ money which is injustice,’’ he explained.

Nami said the meeting was to strategise, exchange information and views aimed at advicing tax authorities and government of African countries on the need to bring the informal sector on board the tax net.

Earlier in his remarks, the ATAF Executive Secretary, Mr Logan Wort lamented that the continent’s tax to GDP ratio was low, the reason they brought tax authorities and experts together to discuss the way forward.

Wort said that the low tax to GDP on the continent was largely due to tax evasion, adding that the informal sector with huge impact must be brought to tax net.