Taxation from Informal Sector Will Check Budget Deficit. Says FIRS Boss
The Chairman of the Federal Inland Revenue Service (FIRS), Mr. Muhammad Nami, Tuesday said taxation from the informal sector is capable of checking budget deficit and increased revenue collection.
Nami said the Service is to bring informal sector into the tax net to ensure good governance and political accountability.
Speaking on the theme ‘The Taxation of the Informal Sector in Africa’ on the occasion of the ninth Country Correspondents meeting and African Tax Administration Forum (ATAF), he said the informal sector was among the most difficult to tax as many conceal a lot from tax agencies.
According to him, “Paying taxes is likely to promote responsiveness by the state to the needs of the informal sector in a bid to encourage voluntary compliance. It is also likely to encourage collective action, collective political engagement and bargaining by the informal sector.
“Those who operate in the formal sector deem it unfair to have to pay taxes while those in the informal sector do not. This impacts their tax morale and can result in low tax compliance among those in the formal sector.”
He described taxing the informal sector as unpopular as politicians would not want to lose votes.
“This is because politicians usually promise informal workers protection from taxation in exchange for their votes. In Malawi, for instance, the law provides for withholding tax on imported goods at a rate of three per cent but the tax is yet to be implemented due to perceived political consequences (AfDB, 2018).”
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