The Nigerian government, specifically the Federal Inland Revenue Service (FIRS), has introduced a new initiative called VAT Direct to streamline the collection of Value Added Taxes from the informal sector and reduce the issue of multiple taxations within this sector of the economy.
In a statement released on Monday, FIRS announced its partnership with the Market Traders Association of Nigeria (MATAN) to implement the VAT Direct Initiative. The aim is to facilitate the collection and remittance of VAT from market traders, particularly those operating in the informal sector, by utilizing unified systems technology.
FIRS, the governmental agency responsible for collecting VAT and other revenues in Nigeria, is collaborating with MATAN, which is recognized as the largest organization representing market traders in the country. Established in 1995, MATAN boasts a membership of over 40 million traders.
Through this collaboration, FIRS and MATAN seek to raise awareness among market traders regarding VAT collection and remittance. Additionally, they aim to simplify the process of VAT payment and remittance for market traders by implementing a purpose-built digital platform.
MATAN has developed a digital scheme that enables the enumeration of its members and provides them with digital ID cards. This platform also tracks the turnover of traders, ensuring the accurate collection and remittance of VAT to FIRS. This innovative initiative represents the first of its kind, utilizing technology to foster cooperation between FIRS and the marketplace in VAT collection and remittance.
An important aspect of this collaboration is the effort to address the issue of multiple taxations in the marketplace. FIRS plans to partner with security agencies to curb the activities of intermediaries and unauthorized tax collectors, thereby promoting a more streamlined and efficient tax collection process.
By implementing the VAT Direct Initiative, FIRS aims to enhance VAT revenue generation for all three tiers of government in Nigeria. This increased revenue will ultimately contribute to the funding of crucial infrastructure development and social amenities.
As part of the enumeration process, MATAN members will be issued ID cards that contain their Tax Identification Number (TIN) and other relevant personal details. This identification system will further facilitate the accurate tracking of VAT payments and ensure the integrity of the tax collection process.
In the first quarter of 2023, Nigeria witnessed a 1.75% quarter-on-quarter increase in VAT, reaching a total of N709.59 billion. Among various sectors, the manufacturing industry accounted for the largest share of VAT collection during this period, contributing 29.65%. The information and communication sector followed closely with a share of 19.29%, while mining and quarrying made a 12.24% contribution to VAT collection.
