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Federal Government Imposes VAT on Informal Sector, Tax Burden Shifts to Citizens

In a move that could impact citizens’ pockets, the Nigerian government has made the decision to tax the informal sector. The Federal Inland Revenue Service (FIRS) has introduced the VAT Direct Initiative, aiming to collect value-added taxes from the informal economy and reduce multiple taxes.

Partnering with the Market Traders Association of Nigeria (MATAN), FIRS plans to enforce VAT collection and remittance from their over 40 million members operating in the informal sector. This collaboration involves promoting awareness of VAT, simplifying payment through a digital platform, and tracking turnover to ensure accurate tax collection.

While the FIRS claims this initiative will combat multiple taxes and boost revenue for infrastructure and social amenities, citizens should be prepared for the potential financial impact. The VAT rate has already increased by 1.75% in the first quarter of 2023, with the manufacturing sector bearing the largest share.

MATAN members will receive ID cards containing their Tax Identification Numbers and personal details for enumeration purposes. However, the introduction of taxation in the informal sector may lead to higher prices for goods and services, affecting citizens’ purchasing power.

With this new tax burden, citizens must be cautious about their finances and prepare for the potential impact on their daily lives.