89% of the informal sector pays some form of tax, as seen in the Informal Economy report by Moniepoint. The report showed that these businesses pay taxes to their local councils and bodies, which take upon themselves the responsibility to set rates and market protocols. Should these businesses refuse to pay, they risk losing their business.
Typically, businesses in Nigeria are subject to the Companies Income Tax. The Federal Inland Revenue Services (FIRS) is responsible for administering the income tax of registered establishments. However, this hasn’t been the case for a sector that is said to contribute 37% of the GDP in emerging markets and half of Nigeria’s GDP.
“Put together, businesses in the informal market contribute over half of Nigeria’s GDP. This is evident in their revenues with the bulk of them (72.3%) hitting monthly revenues of over N1,000,000 monthly,” the report reads.
“Although businesses in the informal economy are often identified by the fact that they do not pay taxes, the reality is that taxation just looks different to them. For them, taxation comes in the form of market levies, which most of them pay.
Almost 9 out of 10 of these businesses say they have paid some market levies in their lifetime. 65.1% pay these levies regularly, 23.6% pay sometimes, and only 11.3% do not,” the report adds.
The Federal Inland Revenue Service (FIRS) estimated that Nigeria’s tax collection rate, which is around 10.8% of GDP, is among the lowest in the world.
Despite the government’s indecision on the subject, the report by Moniepoint revealed that the informal sector already pays tax.
