Lagos, Nigeria – Taiwo Oyedele, Africa tax leader at PricewaterhouseCoopers (PWC), has called on the federal government to prioritize tax awareness and implement safeguards to prevent potential abuse of the new value-added tax direct initiative (VDI) recently announced by the Federal Inland Revenue Service (FIRS) in partnership with the Market Traders Association of Nigeria (MATAN). While commending the government for the initiative, Oyedele emphasized the need for proper education to ensure that traders are informed about their rights and protected from exploitation by tax officers.
In a series of recommendations, the tax expert highlighted key issues that need to be addressed for the initiative to be effective. These include the low morale for tax payments due to a lack of trust in government, insufficient fiscal exchange for taxes paid, and corruption in tax administration. Oyedele stressed that the government must tackle these challenges to encourage voluntary compliance with tax obligations and ensure the success of the initiative.
The FIRS initiative aims to bring traders in the most informal sector under the MATAN umbrella and formalize their tax status. It also aims to protect traders from multiple taxes and extortions by non-state actors. Oyedele urged traders to consider in their calculations of the percentage increases in the value of goods or services, stating that the VAT should not significantly impact their sales. He emphasized that the traders should pay less tax overall if the illegal taxes they currently pay are eliminated.
Additionally, Oyedele called on FIRS to collaborate with various states, similar to their arrangement with Lagos, to ensure that traders who are not yet in the tax net for personal income tax purposes are included, subject to the income tax exemption of N360,000 per annum as provided by the law.
The tax expert also emphasized the importance of protecting customers from exploitation. He explained that many traders, especially micro and small enterprises, are exempt from charging VAT on basic items and certain products. For those liable to charge VAT, they should only apply the tax to their profit margins and not use the VAT arrangement as an excuse to hike prices.
In conclusion, Oyedele highlighted that the success of the VAT initiative goes beyond the revenue collected by FIRS, as it provides an opportunity to increase tax awareness, gather data about traders and their businesses for economic planning, and support the informal sector through simplified record-keeping and access to finance.
With these recommendations, the government has been urged to prioritize tax education and implement necessary safeguards to ensure the smooth and fair implementation of the VAT initiative for traders.
