The Federal Inland Revenue Service (FIRS) has announced that dealers of foodstuffs will be exempt from the proposed Value Added Tax (VAT) Direct, a tax initiative targeting traders in the informal economy. Artisans are also excluded from compliance with this tax.
The decision comes in response to concerns raised by many Nigerians regarding the proposed tax. According to Loveth Ononuga, the Director of VAT at FIRS, traders with a turnover below N25 million and those dealing in VAT-exempt goods will not be affected by the initiative.
Ononuga explained that the focus of VAT Direct is primarily on expanding the tax net to include traders who are not formally registered and have not been paying VAT as required by the VAT Act. The initiative specifically targets dealers of electronics, textiles, gold, and “deep-pocket traders” who may have previously evaded taxation.
The VAT Direct initiative aims to create an enumeration of traders to establish a comprehensive database of the business community in Nigeria. Currently, the formal sector constitutes only 20 percent of Nigerian businesses, while the remaining 80 percent operate in the informal sector.
Ononuga emphasized the importance of data collection for effective economic planning at both the state and federal levels. Having accurate data on traders will enable the government to provide incentives and implement palliative interventions more efficiently.
She also noted that the VAT Direct initiative aims to reduce multiple taxation. FIRS is collaborating with the Market Traders Association of Nigeria (MATAN) and law enforcement agencies to address this issue.
VAT-exempt goods include healthcare-related equipment and services, medicines (excluding cosmetology and fitness devices), as well as spas, gymnasiums, and similar services.
FIRS Chairman Muhammad Nami, in his role as Chairman of the Joint Tax Board (JTB), will collaborate with JTB and MATAN to eliminate multiple taxes and illegal dues, ensuring that touts posing as tax collectors are eradicated from markets.
