The Federal Inland Revenue Service (FIRS), on behalf of the Nigerian government, has unveiled the VAT Direct Initiative, a program aimed at streamlining tax collection in the informal sector and reducing multiple taxations. In an official statement released on Monday, the FIRS announced its collaboration with the Market Traders Association of Nigeria (MATAN) to collect and remit Value Added Taxes (VAT) from their members, particularly those operating in the informal economy, utilizing unified systems technology.

As the designated agency responsible for VAT collection and other federal revenues, the FIRS aims to improve tax compliance within the informal sector. The Market Traders Association of Nigeria, established in 1995, represents a significant presence in the country’s informal market, boasting a membership of over 40 million traders.

The FIRS highlighted its partnership with MATAN, which involves raising awareness about VAT collection and remittance in the marketplace and informal sector. This collaboration also includes the implementation of a purpose-built digital platform to simplify VAT payment and remittance for traders in the informal sector.

MATAN has developed a digital platform that provides identification cards and tracks the turnover of its members, ensuring accurate VAT collection. This system enables the VAT accrued by individual traders to be collected and remitted to the FIRS effectively. By leveraging digital technology, the aim is to enhance efficiency, transparency, and compliance in the collection of VAT from the informal sector.

The introduction of the VAT Direct Initiative reflects the government’s commitment to widening the tax base and reducing the burden of multiple taxations. Through this collaboration, the FIRS and MATAN strive to streamline the tax collection process, promote tax awareness, and facilitate a more efficient and effective system for VAT collection and remittance in Nigeria’s informal economy.:

“The Initiative is the first of its kind that will utilize technology to foster collaboration between the FIRS and the marketplace for the collection and remittance of VAT.

FIRS says this will help tackle multiple taxations in the marketplace through partnerships with security agencies to curb the activities of touts and self-imposed tax collectors.

“This will also boost VAR revenue generation for the three tiers of government, which in turn means more money to fund infrastructure and social amenities.”

MATAN members will each receive an ID card upon enumeration, which would contain their Tax Identification Number and other personal details.

Nigeria’s Value Added Tax (VAT) increased by 1.75% on a quarter-on-quarter basis, reaching N709.59 billion in Q1 2023.

The manufacturing sector accounted for the largest share of VAT collection in Q1 2023 at 29.65%.

Information and communication followed with a share of 19.29%, while mining & quarrying contributed 12.24% to VAT collection during the same period.

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