For those who may have read our earlier work on Image Rights (Vol 1, Issue 3), one cannot resist a further and deeper evaluation of Image Rights in the light of present decisions of courts and constant media-cum-image issues around the world. Nigerian Informal Sector and Tax Challenges . Umoh, The Informal Sector, www.onlinenigeria.com, G.T. The informal economy is described as the sum total of economic activity that happens outside state regulation, which is neither taxed nor represented in a country's GDP. This impacts their tax morale and can result in low tax compliance among those in the formal sector. Beneria and Floro (2006); UNRISD (2010) argued that, informal sector typically earn less income, have unstable income, and do not have access to basic protections and services and for such reasons believe that, informal sector lacks the potential for growth. It means that they do not maintain proper books of account which should enable them produce audited accounts and compute the appropriate tax payable for the period. The size of the informal economy of Nigeria as at 2018 is 67% of the GDP. Nigerian informal sector is described as any commercial activities from all sector of the economy that operate outside the purview of government regulation (Ekpo and Umoh, 1996). In this wise, it envisages frequent interactions and engagements between the various stakeholders to ensure seamless administration of tax regimes. Government support are of three categories, some of them are interwoven in concept and operation. Agencies have also been established to administer government assistance. Those who operate in the formal sector deem it unfair to have to pay taxes while those in the informal sector do not. Activities in the Informal Service sub-sector include traditional birth attendants, menial labour, traditional healers etc. While PITA relies on the Prescriptive tax regime as means of taxing on the informal sector, the NTP on the hand relies on the Presumptive Income Tax Assessment and it is apparent that these tax regimes have the same intent. We have introduced a section that captures some other recently trending topics in the IP sphere in Nigeria. Our guest writers too were not left in the action. While we continue to lament on the dwindling economy which we operate in Nigeria, a lot of solutions to the menace are being presented, a very important known means to sustain and grow any economy is taxation. In essence, the above provision mandates that the income of a taxpayer from the informal sector shall be taxed in accordance with the prescriptive tax regime. The Informal sector, which is the focus of this paper is also known as the “grey economy”. The sheer size of the sector makes it practically difficult to ascertain the actual membership and activities of the sector. www.ajol.info, Aisha Alhassan, Former Minister of Women Affairs and Social Development showcases President Buhari’s government’s empowerment programmes at UN event www.businessdayonline.com, Affordable Credit for Grassroots Businesses www.nationonlineng.net, “Lagos Tax Agency To Go After Informal Sector Tax Payers” on Nigeria Real Estate Hub; www.nigeriarealestatehub.com, Embuka Anna, Presumptive Tax: Equalizing the Distribution of Tax Burden www.vanguardngr.com. While voluntary compliance is a benefit of this tax regime, the “imprecise” nature of the tax assessment could pose hardship to the business owner. The assessment is based on three major indicators; total tax rate, number of payments and compliance time. Abuja — The Executive Chairman of the Federal Inland Revenue Service (FIRS), Mr. Muhammad Nami, yesterday said Nigeria and the rest of Africa must exploit the potential in the informal sector of the economy to reduce budget deficits and increase tax revenue collection. On the other hand, it would appear that government is losing potential income which would otherwise be revenue for it. This edition is unique as the articles featured herein are not only educative but they are evolutional. (Principal Partner & Group Head). This research project was undertaken between January and February, 2017 by Int'l centre for women empowerment and child development. Some of the issues plaguing the proper taxation of these businesses include: c. How should they be assessed for taxation? Government is unable to capture the existence of these businesses and cannot therefore include them in its tax dragnet. It is important to note that the informal sector has emerged to absorb the shortfalls of the formal sector, unemployment as well as provide a means of livelihood for the semi-skilled and unskilled unlike. Taxation of the informal sector is assuming centre stage in the drive for revenue by governments at all levels. IS seems difficult to tax because of administrative problems, human capital and personnel shortage, lack of record keeping, nature of its economic activities and cost implications. They typically operate at a low level of organization, with little or no division between labor and capital as factors of production. September 4, 2020. Tax avoidance and evasion have become the culture of some individuals and businesses operating in Nigeria.One of the latest indexes, “Paying Taxes 2015”, which compares tax systems across the world, ranked Nigeria the 3 rd worst globally in tax compliance. The Nigerian tax authorities have been making efforts aimed at increasing the level of tax collections and improving government revenue generation from taxation. Terms & Conditions | This makes it difficult for an independent party to accurately evaluate the financial position of the business in order to determine the amount of tax payable. A standard assessment i.e apportioning an aggregate sum to tax payers doing the same kind of business. Abuja, Nigeria. This low level of tax registration certainly creates a narrow tax base from which the Government is able to collect taxes and therefore impacts Government’s ability to generate revenue through taxes. The mass of economic activities can be categorized into formal and informal sectors. Taxing the Informal Sector (IS) and its taxpayers’ compliance level has become a focus of attention in recent times by scholars and policy makers because of IS contribution to the country. It also places significant burden on the existing taxpayers who in some instances, already have a high level of compliance, as the tax authorities continues to focus on these known taxpayers for audits and tax drives. It is noteworthy that government efforts would appear albeit minimal given the robustness of the informal sector, it would appear that quite a number of businesses are left out of these schemes thereby creating two germane difficulties for government; i. It remains incontestable that the law mandates tax payers to pay their taxes regardless of whether or not government provides infrastructure to support economic activities, it would however be a moral victory for government to fulfill its duty to its citizens, in order to motivate/demand the citizens to fulfil their civic duties. The educational charge is pegged at 2 percent of the assessable profit while a 10 percent withholding tax is deducted … The average business person within the informal sector does not consider himself a taxable person. Despite these efforts, the general level of tax compliance in Nigeria is still quite low. The Barcode is a Grid Creative Newsletter Website by Stillwaters Law Firm. 7 This fund is expected to target 10,000 women per state. Commodity prices have remained volatile globally, diversification into other better paying natural resources require massive investment income which government does not have readily. Arosanyin and G. T Ijaiya: Government Assistance for Informal Sector Enterprises in Nigeria. Government support are of three categories, some of them are interwoven in concept and operation. The study investigates the effect of informal sector tax proceeds on capital development in Lagos Metropolis. 2. ii. Accountability and good governance have been identified as the key to achieving effective informal sector taxation. ©Andersen Tax LLC and Andersen Tax LP. View Academics in Taxation and Informal Sector in Nigeria on Academia.edu. Upon recognizing the huge revenue stream in the informal sector, the LIRS had earlier in the year classified the tax payers in the informal sector to be: market men/women and artisans; micro, small and medium scale enterprises (including professionals); and household domestic staff. The ingenuity of such thought in the present economy of Nigeria cannot be over-emphasized. The effect of this information is two-fold. Should businesses in the Informal Sector be taxed? The economic activities in the Informal financial sub-sector include the Ajo/Esusu, informal money lenders among others. Disentangling the Effects of Ethnicity and Social Intermediaries on Informal Sector Tax in Lagos, Nigeria Project Researchers: Adrienne LeBas, Jessica Gottlieb & Janica Magat In this project, we aim to investigate the role ethnicity plays in shaping attitudes toward taxation and the state. Given the operations of the informal sector, information gathering would be a herculean task. Specifically, the size of the informal economy in Nigeria ranges between 47 and 67 percent from 1970 to 2018, and averages 56 percent of the GDP over the same period; and that the nation, on average, losses 56 percent of her potential tax revenue yearly to informality, with the estimated tax revenue loss … Media, Entertainment, Technology and Sports (METS) Law, Photo Privacy and Media/Image Rights in Nigeria, The Status and Role of an Alternate Director Under the Nigerian Corporate Governance. Taxing the informal sector The informal sector consists of firms and individuals who are not fully registered and regulated, and therefore not in the standard tax net. TAXATION IN THE INFORMAL SECTOR IN DELTA STATE. Andersen Tax LP is a Nigerian member firm of Andersen Global, a Swiss verein comprised of legally separate, independent member firms located throughout the world providing services under their own name or the brand “Andersen Tax” or “Andersen Tax & Legal.” Andersen Global does not provide any services and has no responsibility for any actions of the member firms, and the member firms have no responsibility for any actions of Andersen Global. In particular, the NTP notes that PITAS would help the tax authorities deal effectively with the taxable persons who have historically failed to comply with the tax laws due to their size or lack of business address. This category of taxable persons appear to be predominant in the informal sector. The effect of this information is two-fold. The LIRS stated that it has begun the process of overhauling its informal sector operations to ease voluntary compliance by tax payers. It would appear that this assessment can be determined based on best judgement. In partnership with the United Nations Industrial Development Organization, it birthed the Sub–contracting and Partnership Exchange (SPX) to link domestic enterprises in developing countries to the supply chains of large domestic or international companies 5 with the grant of credit and investment facilities in 1999. principles of good tax system. Accountability and good governance have been identified as the key to achieving effective informal sector taxation. An example of such support is the N1.6 billion special intervention fund – National Women Empowerment Fund aimed at supporting grassroots women operating informal businesses by providing start up and scale-up credit for them. Ifeanyi presents us with the possibility of an un-explored area of intellectual property – a difficult dialogue, a thought, nay, a reality which intellectual property lawyers, lawmakers, businessmen and directors all over the world may be interested in. To this end, the informal sector can be explained as the sum total of income generating activities outside of a government regulated contractual relationship of production.1, The informal sector may be subdivided into Productive, Service and Financial sectors. Abstract. The informal sector They typically operate at a low level of organization, with little or no division between labor and capital as factors of production. Citizens’ views on informal taxation in Nigeria23 ActionAid’s local partner in Ondo, Nigeria, the Justice Development and Peace Centre (JDPC) says that problems with taxation of informal market traders include a lack of tax statistics and transparency, a poor tax administration and a … 3. April 14, 2020. There is therefore little or no incentive to voluntarily remit or pay taxes to government. 2. a. It is however not the focus of this paper. This puts Nigeria in a class of its own as the United Nations assessments suggest that for developing economies the average percentage composition of GDP by informal sector ought to be 41% and for countries in transition; 38%. Taxation is a viable and long-lasting solution to government revenue shortfalls. Your email address will not be published. Please read these terms and conditions before using the website. This is all in a bid to stimulate economic growth and create an enabling environment for more investment. The study adopted Ex-post facto design to obtain secondary data, covering 20 years (2000–2019) from the Lagos State Internal Revenue Service and the Ministry of Budget and Planning. Thus, Alex in a deeper evaluation presents us, with the possibility of a relief at common law. Also Read: Best Accounting Software For Small Business Owners In Nigeria. The need for government to capture the informal sector into the tax net has never been more urgent. Therefore, the effort of all players should be to evolve a tax system that works well for all parties and the economy. It is based on a taxpayer’s supposed income given the fact that most participants in the sector do not keep proper records of account. The informal sector which accounts for more than sixty percent of economic activities in Nigeria has been noted to be a limiting factor in the revenue base of the country. According to the NTP, “the Presumptive Income Tax Assessment will require less documentation from the tax payer and also result in a quick and effective method of providing an assessment”. Amaka skillfully links economy with knowledge and ties both around intellectual property. Companies in Nigeria pay 30 percent of their worldwide profit while foreign companies pay 30 percent of only the profit made in Nigeria. The latter effect which is the focus of this paper is worthy of note. This is spearheaded by the Federal Inland Revenue Service (FIRS) and the other State Internal Revenue Services. There has been a lot of focus on the fact that Nigeria’s tax to GDP ratio of about 6.1% is quite low and appears to remain unchanged despite all the efforts of the tax authorities to improve collection. The Informal Productive subsector involves economic activities relating to production of tangible goods such as agricultural production, small scale manufacturing, building & construction, furniture & garment making, wielding etc. The biggest challenge is that most of the businesses operating in the informal sector do not keep proper records of their day-to-day transactions. Regardless of the form of taxation i.e direct or indirect, a good tax system is founded on equality, certainty, convenience and economy; these are still largely relevant in today’s economy. This may be visible, irregular, non-structured, backyard, underground, subterranean, unabsorbed or residual. 3. Page 6 of 7 9th ATAF COUNTRY CORRESPONDENTS’ CONFERENCE AND 1ST EXPERTS MEETING ON TAXATION OF THE INFORMAL SECTOR Abuja, Nigeria: 4 – 6 February 2020 Transcorp Hilton Hotel, Abuja AGENDA Day 3: Thursday 6 February 2020 09h00 – 10h00 taxation in the African continent, i.e. Given the fact that to access government support, business owners are required to undertake some form of registration with it, inter-agency collaboration would even helpful to at least identify these potential taxpayers. 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