29 February 2012

Nigeria: Tax Board Plans Harmonised Tax for Informal Sector

The Joint Tax Board (JTB) has said it is currently working on a harmonised presumptive tax regime for operators in the informal sector across the country.

Chairman of JTB, Mrs. Ifueko Omoigui-Okauru, said this yesterday at a media briefing on the Personal Income Tax (PIT) amendment Act, 2011, in Lagos.

She said the regime would help drag a lot of people in the informal sector that had been evading the payment of tax, into the tax net.

According to her, the 'presumptive' tax regime had been introduced in other developing countries, particularly in Africa.

She explained: "Now, Lagos state has its own form of presumptive tax regime, but now we are going to have a regulation under the auspices of the law, which cuts across all states where we will collectively look at those benchmarks and issues together to see how best the tax regime will work.

"Of course, whatever regulation will also need flexibility for states governments, so as to sooth what is relevant in their states. This is because what is relevant in Lagos, may not be relevant in Sokoto. So whatever regulation we are going to have, will have that kind of guide."

Omoigui- Okauru, who is also the chairman of the Federal Inland Revenue Service (FIRS), said the presumptive tax regime is one that had been implemented in a lot of developing countries, particular across Africa., saying that the system "is well developed and we are now introducing it into our tax law."

"You can have the most efficient tax authority, the most automation, the best people; the best funding and your revenue may still be low, if you don't have the right tax base. The reason is that if you are taxing income, if the individual do not have high income, you won't have money to tax.

"If you don't have companies coming into your state to invest, generate income and create jobs, you won't have money to tax. Even the informal sector, if you don't have a vibrant informal sector, you won't have money to tax," she added.

According to her, one of the major reasons for the amendment of the PIT was to bring it to date with existing realities of the Nigerian economy, especially in relation to how the Act impacts on low and middle income earners.

"From the onset therefore, it was conceived to ensure that PIT is administered equitably and that its major provisions reflected the focus of the overall tax reforms.

"These included introducing a more equitable tax system by the introduction of realistic tax rates and efficient and effective tax administration system, simplification of laws, empowering tax authorities and a shift from direct to indirect taxation by lowering of direct tax rates amongst others," she added.

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