A RESEARCH REPORT ON TAXATION OF THE INFORMAL SECTOR...

A RESEARCH REPORT ON TAXATION OF THE INFORMAL SECTOROF EKITI STATE NIGERIA.

CONDUCTED BY:NEW INITIATIVE FOR SOCIAL DEVELOPMENT (NISD),

[email protected], 08035777031.

IN COLLABORATION WITH THE EKITI TAX JUSTICE GROUP

SUPPORTED BY: CIVIL SOCIETY LEGISLATIVE ADVOCACY CENTRE (CISLAC)JANUARY 2017.

mailto:[email protected]

mailto:[email protected]

Introduction

Goals and Objectives of the Research

About Ekiti State

Research Methodology

Report of Findings

Issues to note

Recommendation

Appendix

01

Con

tent

s01

02

03

04

05

06

07

08

Tax is a necessary ingredient for civilisation. The history of man has proved that tax is inevitable if development is sought by the populace; since ancient time and in several forms of government and governance, tax has been regarded as a necessity, initially tax are paid to kings, feudal lords and traditional rulers as the case may be and as civilization come in to an organized form of government.

No system or rules can be effective unless it enjoys some measures of financial independence. However, taxation of the informal sector is assuming centre stage in the drive for revenue by government at all levels. The informal sector will remain a major feature of economic activity in Nigeria, In between the FIRS, Joint Tax Board JTB, the states and Local Governments, there is still lacking a clear, coherence, and systemic policy on how to effectively tax the sector in a manner that is sustainable, engender the protection of rights of tax payers, promote voluntary compliance, ensure fairness and justice for tax payers, including the women, stimulate wealth creation, job creation and effective service delivery.

The project is to conduct research in the informal sector in Ekiti State as Supported by Civil Society Legislative Advocacy Centre CISLAC.

In the year 2012, CISLAC conducted a baseline study of Taxation in Nigeria, including Citizens' Perception and Tax Gap Analysis. The research revealed the existence of a huge tax gap and low citizens' perception of the efficiency of the tax system in Nigeria. It also revealed that a major contributory factor to the low Tax to GDP ratio was the large informal sector which is

INTRODUCTION

Taxation Of The Informal Sector Of Ekiti State Nigeria.

Tax is a necessary ingredient for civilisation.

The project is to conduct research in the informal sector in Ekiti State as Supported by Civil Society Legislative Advocacy Centre CISLAC.

not effectively captured in the tax net. The 16 states of Southern Nigeria has the highest levels of informal activities in Nigeria.The informal sector is so complex that it has presented challenges of revenue mobilization for tax authorities with some sections successfully evading or avoiding taxes while there is a heavy burden of payments by some other sections of the same sector. The challenges of the sector is also acknowledged in the National Tax Policy, NTP, which stated that compliance has been a great problem in the Nigerian tax system as a result of the large scale informal sector. The sector, also referred to as a 'hard to tax' sector, therefore lacks a clear policy for its taxation and several levels of governments, especially at sub-national and local government levels, introduced multiples strategies of generating taxes from the sector. These contributed to the exacerbation of poverty and widening of inequality as informal sector players-artisans, subsistence workers and market women bear heavy burdens of arbitrarily imposed multiple levies, rates and charges, sometimes collected using methods that are dehumanizing and causing bodily harm and in some cases death to tax payers.Informal Sectors: Informal sector comprises of mainly unregistered and unstructured small and medium scale businesses as well as other players in the economy. “All economic activities that contribute to the officially calculated gross national product but currently unregistered”. (Feige, 1989).

Informal sector for revenue generation for State and Local Government include:• Shops, Kiosks, Approved open market stalls or stand• Tenement rates, Licensing fee for sale of liquor, Slaughter slab licence• Marriage, birth and death certificate


T h e s e c t o r , a l s o referred to as a 'hard to tax' sector, therefore lacks a clear policy for its taxation and several levels of governments, e s p e c i a l ly a t s u b -nat iona l and loca l government levels,

The challenges of the s e c t o r i s a l s o acknowledged in the National Tax Policy, NTP, which stated that compliance has been a great problem in the Nigerian tax system as a result of the large scale informal sector.

• Street naming fee, • Motor part levy• Parking fees (street parking or otherwise), • Domestic animals licence fee• Licences for auto mobiles(all the sizes and categories)• Radio and TV licence fee, Public convenience, Sewage

disposal • Cemetery and burial ground permit fee• Permit for private and public entertainment • Wharf landing fees• Food sale premises, Hoteliers licence and fees Okada tolls/fees/levies, Etc

Saddled with the responsibilities of revenue collection in the state are the board of internal revenue and the signage agency while Local Government rate offices replicate that in the council level with the help of Bye-Laws where available. The state ministry of Budget and economic planning is responsible for maintaining and regulating fiscal policies in the state. They owe it a duty to cut excesses in government expenditures and work with the department for revenue services to improve government businesses through increased coverage of revenue collection.

Target of the Study:

• Tax payers in the informal sector of the State • Ekiti State Ministry of Budget and Economic Planning• The State Board of Internal Revenue• Signage Agency • Local Government Revenue Committee and rate

officers.


Saddled with the responsibilities of revenue collection in the state are the board of internal revenue and the signage agency while Local Government rate offices replicate that in the council level with the help of Bye-Laws where available.

“

”

Goal:

The goal of the project is to conduct a well-researched report on the tax status, policies and practices in the informal sector in Ekiti State clearly addressing impacts on subsistence businesses and small players in the informal sector.

Objectives:

· To understand the administration of taxation of the informal sector in Ekiti State as it affect all players in the sector, especially small scale artisans, traders, including women and subsistence businesses.

· To provide CSOs and Government with evidence of the effect of taxation on the informal sector in Ekiti State to inform advocacy and policy review.

· To empower workers in the informal sector of their tax liabilities and mobilize active citizenship for right based approach to tax administration.

· To increase awareness about tax issues in the informal sector in Ekiti State to encourage voluntary tax compliance and demand accountability in revenue management.

GOAL AND OBJECTIVE OF THE PROJECT:


Ekiti State is situated entirely within the tropics. It is located between longitudes 40°51� and 50°451� East of the Greenwich meridian and latitudes 70°151� and 80°51� north of the Equator. It lies south of Kwara and Kogi State, East of Osun State and bounded by Ondo State in the East and in the south, with a total land Area of 5887.890sq km. Ekiti State has 16 Local Government Councils. By 1991 Census, the population of Ekiti State was 1,647,822 while the estimated population upon its creation on October 1st 1996 was put at 1,750,000 with the capital located at Ado-Ekiti. The 2006 population census by the National Population Commission put the population of Ekiti State at 2,384,212 people.

The Ekitis, whose ancestors migrate from Ile-Ife as a people, form one of the largest ethnic groups in Yoruba land. Ekiti people are culturally homogeneous and they speak a dialect of Yoruba language known as Ekiti. The homogeneous nature of Ekiti confers on the state some uniqueness among the states of the federation. Slight differences are noticeable in the Ekiti dialect of the Yoruba language spoken by the people. Ekiti as a people settle in nucleus urban patterns, well linked with network of roads.

The State can boast of more than 127 large and small, ancient and modern towns, located on hills and valleys that characterise the state from which the confinement takes its name, Ekiti, that is, 'Okiti' meaning hill. The people of Ekiti are hard-working, upright, studious and very articulate. Ekiti men are predominantly farmers but women engage in trading. The people are mostly Muslims and Christians while some are still traditional religionists.

ABOUT EKITI STATE:


Ekiti State has 16 Local Government Councils.

16

2.4m The 2006 population census by the National Population Commission put the population of Ekiti State at 2,384,212 people.

Oct 1 1996Ekiti State was created on

The state is highly rich in culture. They have their own unique traditional way of: Dressing, Dancing, Festival, religion and other ways of life. As enumerated below: The rulers of the Towns are Obas like other Yoruba Towns. Traditionally, the natural rulers in Ekiti State, whose people are Yoruba, are usually described as sacred or divine kings.

Their installation and coronation are performed with solemn and lengthy rites which set them apart, thereafter living an ordered ceremonial existence, secluded in their palaces, subjected to the many rituals of court and approached only with infinite respect. They rarely appear in public, except on ceremonial occasions.

By ancient customs, the Obas were not only the heads of their towns and kingdoms, but by their personifications, reincarnating also all their ancestors back to the origin of the dynasties. They are also the titular heads of all religious sets in their kingdoms. Their appointments are, partly by divination, made by the king makers who are invariably the high chiefs. They are appointed from among the children of past rulers.

The ceremonies between their appointments and coronation are elaborate. The sacredness of their offices was neither empty nor nominal; they are regarded by their people as divinity with whose well being, their own conditions are bound up. They are the sources of honour, able to bestow titles and chieftaincies. The Obas are also the traditional fountain of justice.


In the process of accomplishing the objectives of this study, the method used are: personal interviews, verbal interrogation, questionnaires and an all encompassing interface among government officials and the informal tax payers. Others are literatures consultations and organised questioning and fact findings. The research targeted the State and four Local Governments as sample out of the 16 LGAs in the State.

Target LGAs:1. Ado LGA2. Ijero LGA3. Ilejemeje LGA4. Ekiti South-west LGA

These local governments were chosen on the following conditions: o To have fair representation of the three senatorial districts in the stateo To have a strong idea of what obtains in the capital city of the state as regards informal taxationo To come up reports and position papers that will accommodate the views of active players in the informal sector.

Activities conducted:

· Obtaining the relevant laws in the State and Bye-laws in the LGAs on taxation in Ekiti State: the team worked with the relevant State ministries, department and agencies as well as the State House of Assembly to try to obtain relevant laws and policy documents on taxation in the State. This was expected to reveal what is the stated tax, who should collect the taxes or

METHODOLOGY


where the taxes are to be remitted and the penalty mete out for defaulters. (Unfortunately no law could be obtained or confirmed to be available for taxes in the State and only Ekiti-Southwest has a law which was not released)

· Mapping of the informal sectors in Ekiti State: The major players of the informal sectors in Ekiti were identified and assessed based on their relevance to the economy and revenue of the State. It was discovered that the informal sector were formed into associations mostly based on the similarity of their works and businesses and revenue are collected and enforced through the association. The Government reckoned well with the players of the informal sector and usually devise means of further collecting revenues from them.

· Develop questionnaire and structured interview questions: An in-depth questionnaire and structured interview questions was developed to rightly assess and clearly identify the systems put in place and the expectation of the Government on taxation in the State. The questionnaire for the FGD was also developed to assess what happens in the State among the mapped non-formal sectors. (The Questionnaire and interview questions are in the Appendix session of this report)

· Conducted structured interview with the Permanent Secretary and Directors of Key Ministries, Departments and Agencies of Government involved in taxation in the State: · Conducted focus group discussion with the head of artisan unions, and other non-formal sectors: · Analysed and compiled findings for reporting.


a. Ekiti State – The State Level

Ekiti State Government has NO TAX POLICY or LAW but only make use of the Federal Personal Income Tax Act 2011 as amended. Our search to verify the authenticity of this claim took us to the House of Assembly and to the ministry of budget and economic planning where the claim was later established. The signage Agency and the board of internal revenue were established for this purpose of revenue generation for the State Government. Actions of tax collectors are within the Law but the Personal Income Tax Act are reported by tax payers of the informal sector not to enlist their interest.

All the members of the informal sector interview reported that the determination of taxes in the State are most times arbitrary by the executive arm of Government which also applies to signage agency; the taxes and levies are usually negotiable; when the Executive arm of Government dictates the taxes, the leaders of their association usually goes to plead with the Governor and compel him to usually review the taxes.

Association do pay jointly as one body at each Local Government level and they a re given one collective receipt which are photocopied and kept by all members of the association as evidence of payment for the year. All taxes and levies are receipted for by a receipt printed by the State Government, taxes are paid yearly through the association leaders and enforcement of payment are carried out by the revenue officers .

FINDINGS FROM THE RESEARCH


Ekiti State Government has NO TAX POLICY or LAW but only make use of the Federal Personal Income Tax Act 2011 as amended.

the taxes and levies are usually negotiable; when the Executive arm of Government dictates the taxes, the l e a d e r s o f t h e i r association usually goes to plead with the Governor and compel him to usually review the taxes.

b. Ado Ekiti Local Government

Ado Ekiti Local Government is the most populated Local Government being the State Capital, it accommodates State presence and local influence and needless to say that whatever obtains in this Local Government as far as administration of tax in the informal sector is concerned is a tool for assumption and assessment. Located in the central senatorial district of the state and blessed with the largest percentage of artisans and small scale business owners.

The of the Local Government;Rate Officer

· Confirmed the availability of a Bye Law which was inherited from the Old Ondo State and amended by the Local Government authority and thus guides the administration of tax of the informal sector. Although the officer could not produce the bye-law.· Said the Bye Law is 80% effective and a review is necessary.· However, he expressed the challenges encountered by the Local Government revenue collectors to include but not limited to multiple taxation on the informal sector by the State Government which usually makes the tax payers suspicious and hostile towards the revenue collectors from the Local Government, resistance and hostility from members of the public and poor working condition.

On assessing the effect of taxation on the people of the Local Government, the Rate Officer said market roads are the priorities of the council authority and sewage management in



the market premises are among the values tax payers gets, Others are micro credit opportunities from the government and other social interventions.

Structured Questions for the informal tax payers in Ado Local Government

Number of associations sampled and questioned:6 Associations (each consisting of not less than 50 members)

Summary of Structured Questions

Market Woman

Hotelier Association

Tipper Association

Butchers Association

Hair Dressing Association

Drivers UnioDrivers Unionn

Tax Perception

Government Money

Government Money

Citizens Contribution



Government Money

Tax Awareness

Yes Yes No Yes No Yes

Tax Interest Yes Yes No No No Yes

Awareness on Tax Evasion

No Yes Yes Completely Ignorant

Completely Ignorant

Yes



Market Woman

Hotelier Association

Tipper Association


Hair Dressing Association

Drivers Union

Awareness on Double Taxation

No Yes Not for once

No No No

Awareness on Tax Types

Yes Yes but cant differentiate

No Yes No Yes

Tax Collectors Approach

Friendly Sometimes

Not friendly Friendly Sometimes

Not friendly Not friendly Friendly Sometimes

Tax Payment to:

Tax Collector

Bank To tax collector

To tax Collectors

To tax collector and to association head

Bank

Tax Evidence

Printed receipt

Printed receipt, inscriptions and on official sheets

Printed receipt

Printed receipt

Printed receipt

Printed receipt

Tax Values No No Yes No No Yes

How do you see a tax collector

Friend Cheater Friend Friend Thief Friend


33.33%

66.67%

Tax as Citizen’s contributionTax as Govt’s money

FINDINGS FROM ADO EKITI LOCAL GOVERNMENT ON THETAXATION OF THE INFORMAL SECTOR

Ÿ 4 out of the 6 Associations interview perceived tax to be citizens contribution as against 2 that saw it as Government Money

Ÿ Only half (50%) of the association questioned are aware there should be a tax policy in the local government (but they have never seen it)

Ÿ Only half (50%) are interested in paying tax

Ÿ Half of the sampled association are aware of tax evasion, the remaining are either not aware or completely ignorant

Ÿ Virtually all the sampled associations are unaware of the concept of double taxation

Ÿ The associations are aware of the various types of levels posed at them

Ÿ Half of the sampled association claimed that tax collectors are unfriendly in their approach, others shares the opposite view

Ÿ 4 out of the sampled associations pays their tax directly to tax collectors while only 2 pays to bank

Ÿ · Printed receipt dominates the evidence of tax payment among the sampled association

Ÿ · 4 out of the 6 associations don't have values for their monies

Responds not interestedin paying tax

Responds interested inpaying tax

Perception of the informal sector about tax

Interest of the Informal Sector in Paying Local GovtTax & Levies

50%

50%


Do you get Value for your taxes paid commensuratein Development?

2

4

Ÿ Though the see tax collectors as friends, 2 still see them as either thieves or cheaters

Yes, somehowNo

Associations

Associations


c. Ekiti South-West Local Government Ilawe Ekiti

The Local Government connects the state to Ondo State through Igbara Oke axis and is known to be a major agricultural hub of the State focusing on the planting of banana and plantains which has brought fame and wealth to the Local Government. Also to the credit of the Local Government are the increasing numbers of small scale businesses and artisanal groups due to their proximity to the State capital. These and many other reasons including the fair representation of all the senatorial districts in the State influenced our choice of the Local Government to assess their tax policy especially as it affect the informal sector.

The of the Local Government:rate officer

· Confirm the availability of Bye Law that guides the administration of tax in the informal sector· Said taxes are levelled according to the size of what you sell. Example Hawkers pays trade permit (N1000), Electronics shops (N 3,000), Provision shops (retailers) (N 2,500), Hackney permit (N 500/per annum) and so on· The Bye law which was passed in 2009 enlist the interests of the people but said the very limited copies of the Law is affecting its usage· Tax evasion is common in the Local Government as well as ignorance on the part of tax payers. 'They hate paying taxes' he observed.· Sustained sensitization, community engagement through town halls meeting and thorough enforcements are the options before the Local Government



Market Women Association


Saw Millers Association

Tipper Union

Okada Riders Association

Drivers Union

Tax Perception

Government money

Government money

Unfair extortion

Citizens contribution

It's nothing new

Government money

Tax Awareness

Yes Yes No Yes No Yes

Tax Interest No No No Not friendly No Not called for dialogue


No Yes No Yes No Yes


No No Yes No No No


Yes Yes Yes Yes No Yes


Not friendly Not friendly Friendly Friendly Friendly Friendly

Structured Questions for the informal tax payers in EKITI SOUTH WEST LOCAL GOVERNMENT

No of associations sampled and questioned: 6Findings:





Saw Millers Association

Tipper Union


Drivers Union

Tax Payment to:

Directly to the tax collector

To association Head

To the bank To tax collectors

To tax collectors

To tax collector and LGA officials

Tax Evidence

Printed receipt

Printed receipt

Printed receipt

Printed receipt and ticket

Stickers Printed receipt

Tax Values No No No Yes Yes NO

How do you see a tax collector

Imposter Imposter Cheater Friend Friend Friend


Citizen’s contribution

Government Money

FINDINGS FROM EKITI SOUTH WEST LGA ON THE TAXATION OF THE INFORMAL SECTOR

Ÿ Half of the associations sampled saw taxes as Government monies while the rest saw it as undue extortion, citizens contribution etc

Ÿ 4 out of the 6 associations sampled were aware of tax policies in the Local Government while 2 are not aware

Ÿ 5 of the 6 associations said their interests were not enlisted in the tax policy

Ÿ 4 out of the 6 associations sampled were aware of tax policies in the Local Government while 2 are not aware

Ÿ 5 of the 6 associations said their interests were not enlisted in the tax policy

Ÿ 3 of the associations are aware of Tax evasion, others are not

Ÿ Double Taxation is uncommon among them

Ÿ Virtually all the associations are aware of the various types of tax being paid

Ÿ Tax collectors are friendly to 4 of the associations while the other 2 claimed that they are unfriendly

Perception of the informal sector about tax

Was your interest was enlisted in determination of taxesand the tax policies and laws?

1

1

1

3

Its’s nothing new

Unfair Extortion

No

Yes1

5


Revenue Collectors Approach and conduct to Tax Payers

67

33

Not Friendly

Friendly

Ÿ They all pay directly to tax collectors with the exception of the saw millers that pays to bank

Ÿ Printed receipt is issued as the evidence of payment

Ÿ No corresponding values for tax payers

Ÿ 3 of the sampled associations saw tax collectors as friends while the others either sees them as imposters and cheaters

a. IJERO LOCAL GOVERNMENT

The local Government is in central senatorial district of the State. Blessed with a few numbers of small scale industries and artisanal mining groups, the local government has her fair share of development.The Rate Officer of the Local Government established that:· The Local Government as NO TAX POLICY Or BYE LAW but only make use of initiatives as the management considers appropriate. Tariffs are the basis for determining what to pay per time· The only Law close to this purpose is inherited from the Old Ondo State and no longer relevant to modern day economic realities.· Revenue collectors/ rate officers performs the role in the Local Government Level


· Said the Local Government version of the Bye Law is ongoing and is certain to accommodate sizes, classes and the financial strength of the tax payers· Is of the view that the deployment of local initiatives as helped to a greater extent· Hostility from tax payers, Government not creating values for money and lack of proper training for local rate officers and revenue collectors are some of the challenges they are facing· Said sustained public engagement has been helpful· Said Government should be more alert to her responsibilities.

Structured Questions for the informal tax payers in IJERO LOCAL GOVERNMENTNo of associations sampled and questioned: 6Findings:




Artisanal mining group

Tipper Union


Drivers Union

Tax Perception

Government money

Government money and voluntary donation

Unfair extortion

Government money

Government money

Unfair extortion

Tax Awareness

Yes No No No No No

Tax Interest No No No No No NO


No No No No No Yes


No No No No No Yes





Artisanal mining group

Tipper Union


Drivers Union


Yes No No No No Yes


Friendly Friendly Never Friendly

No Not Friendly Friendly

Tax Payment to:

Tax collectors

Tax collectors None To banks tax collectors

Tax collectors

Tax Evidence

Printed receipt

Printed receipt

Permits Printed receipt

Receipt for stickers.

Printed receipt

Tax Values No No No No No Yes

How do you see a tax

Friend Friend Cheat Imposter Friend Friend


Ÿ 66.67% of the respondents said taxes are Government monies while 33.3% sees it as unfair extortion

Ÿ Only the market women association are aware of the tax policy in the Local Government

Ÿ Artisans interests were not enlisted in the tax policy of the Local Government

Ÿ Double taxation is likely as the groups sampled are unaware of it

Ÿ 4 of the 6 associations knows the various taxes levelled at them, while 2 does not know.

Deductions from IJERO LOCAL GOVERNMENT on Taxationof the INFORMAL SECTOR

33.33%

66.67%

Taxes are unfair extortionTax as Government’s money

Perception of informal Sector tax Payers about taxes

33.33%

66.67%


Pays to the bankPays directly to ta collectors

Tax payment options

16.60%

83.30%

Responders that are not awareResponders that are aware

Ÿ Tax collectors are fairly friendly but some still considers them unfriendly

Ÿ 83.3% pays to the bank while only 16.6% association pays to bank.

Ÿ Printed receipts are the evidence of payment

Ÿ Tax values are far from being derived. Tax payers are complaining

Ÿ 66.6% respondents' sees tax collectors as friends while 33.3% said they are either imposters or cheaters.

Awareness of the various taxes being charged


e. Ilejemeje Local Government

The Local Government lies within the North Senatorial Districts of Ekiti State, comprising of seven major towns which are Iye, Iludun, Ipere, Ijesamodu, Ewu and Ijaro. Ilejemeje people are predominantly farmers. There are petty traders. Small scale artisanal group characterised the Local Government.The of the Local Government established that:Rate Officer· The Local Government as at now is not having a BYE LAW that guides the administration of taxation of the informal sector but insist that work is on-going· The Local Government make use of a TAX POLICY since 2011, designed by the management, approved by the chairman· Tax collection is uneasy in the Local Government, tax payers are sometimes hostile· The Policy is 60% effective· Poor working condition, victimisation and lack of working vehicles are some of the challenges being faced by the revenue collectors.· Although the Policy is in public domain, BYE LAWS remains a necessity· Government should diversify to increase her revenue drive and review the achaic provisions of the tax policy to accommodate current realities.· Multiple taxation should be addressed. State and Local Government should have a well defined tax policy that will address the issue of undue encroachment.


Structured Questions for the informal tax payers in ILEJE-MEJE LOCAL GOVERNMENTNumber of associations sampled and questioned: 6Findings:


Market Women

Beer Parlour Association

Tailoring Association

Saw millers Association

Drivers Union

Tax Perception Citizens contribution

Government money

Citizens contributions

Government money

Citizens contribution

Tax Awareness

No Yes Yes No Yes

Tax Interest No No Yes No No


No No Partially aware

No No


No No No Yes No


No Yes Yes Yes Yes


Friendly sometimes

Friendly Friendly sometimes

Friendly sometimes

Friendly sometimes

Tax Payment to:

To tax collectors

To tax collectors To tax collectors

Tax collectors and Banks

Tax collectors and Banks

Tax Evidence Printed receipt Printed receipt Printed receipt

Printed receipt Receipt and Stickers

Tax Values NO Not really Yes NO Partially Yes

How do you see a tax collectorzz

Govt Worker Govt Worker Govt Worker Cheater Govt Worker


Ÿ 60% of the respondents says taxes are citizens contributions 40% said taxes are government monies

Findings from ILEJE MEJE LOCAL GOVERNMENT

Taxes are unfair extortionTax as Government’s money

Perception of informal tax payers

Ÿ 60% of respondents are aware of the tax policy in the Local Government, others 40% are not aware

40%

60%

Tax Policies awareness

40%

60%

Respondents that are unaware Respondents that are aware


Ÿ Taxes to 80% of the respondent are like burdens that does not accommodate their interests, 20% sees it as normal.

Findings from ILEJE MEJE LOCAL GOVERNMENT

Taxes are normalTaxes are like burden

Payers convenience to tax obligations

Ÿ 60% of respondents are aware of the tax policy in the Local Government, others 40% are not aware

Respondents that are unaware Respondents that are aware

20%

80%

Ÿ Tax evasion is not too common in the Local Government Ÿ Tax payers are not even aware if they pay double taxation or

not since no Bye LawŸ The associations are aware of the various tax types levelled

at them Ÿ Tax collectors often collect tax from the people and they do

this in friendly and civil mannerŸ Printed receipts are the evidence of paymentŸ Dividends of tax loyalty are not enjoyed by the tax payers who

has resulted to fate

Ÿ Taxes to 80% of the respondent are like burdens that does not accommodate their interests, 20% sees it as normal.

Value in Development commensurate to Tax paid?

No corresponding valueYes there are corresponding value Partial value

It is generally observed in the research that:Ÿ Ekiti State Government has no specific Tax Law or Policy

that guides its operations particularly on the informal sector.

Ÿ There is generally no laid down procedure by law for revenue collection and administration at the State level but arbitrary ways usually devised out of convenience or necessity.

Ÿ That Government at the State and Local Government levels need to do more in continuous sensitization of the people on their tax obligations and ensure that their interests are enlisted in the collection and general administration of revenue.

Ÿ The board of internal revenue service and the signage agency claimed to make use of the Federal Personal Income Tax ACT 2011 as amended in the determination of tax levels on the informal sector

Ÿ That the Personal Income Tax Act 2011 was drafted by the Federal Joint Tax Board with no clear/little inputs from the local level.

Ÿ That Local Government makes use of bye Laws to generate revenue where it exists but such bye-laws rarely exist or are far outdated with current realities and thus revenue collectors relies on their initiatives for the administration of levies and taxes as directed by the Executive arm.

Ÿ There are challenges of mistrust of the Government by the people in the taxation of the informal sector in Ekiti State

Ÿ That the issue of Multiple taxation and evasion (even though not clearly understood by the people) is very common in the State

Ÿ That rates administered from one Local Government to

ISSUES TO NOTE AND GENERAL OBSERVATION


another Local Government is not uniform and a general review of the Local Government tax and revenue administration is necessary.

Ÿ That revenue collectors and Local Government Rate Officers are working under harsh and hostile conditions.



Ÿ State Government should see to the amendment and adoption of the PERSONAL INCOME TAX ACT 2011 to have a State version to take into consideration local peculiarities

Ÿ That the State Government through the Board of Internal Revenue Service should harmonise revenue collection in the State and Local Governments as this will help address the issue of double taxation

Ÿ Local and State Government at all levels should ensure the provision of statistical database of the informal tax payers in their domain, this will help in policy formulation.

Ÿ Development of modern IGR template for the State and Local government

Ÿ Government should formalise the informal group in the State into cooperative societies. This will grow their businesses and improve their tax obligation.

Ÿ The Government should develop appropriate and sustainable accounting systems that will be transparent in the administration of tax in the informal sector

Ÿ Sustained engagement between Government at all levels and the informal tax payers are crucial to discuss issues of taxation in the informal sector.

Ÿ Local Governments in the States mostly are yet to have BYE LAWS, they should enact one and those who do should consistently review it to address modern realities

Ÿ That the working conditions of the revenue officers and Local rate officers should be improved. Capacity building programs should be approved for them as well as working vehicles and other incentives which includes security personnel for their duty post

Ÿ Provision of social and economic services to the informal tax payers. Social services such as good wards, basic health

RECOMMENDATIONS


facilities, environmental sanitations, town halls, street light water supply etc.

Ÿ Enforcement of compliance by means of legal prosecution of defaulters to reduce tax evasion and to serve as deterrent to defaulters.

Ÿ

1. APPENDIX

Appendix i: INTERVIEW QUESTIONS ON TAX ADMINISTRATION OF THE INFORMAL

SECTOR FOR DIRECTORS OF TAX AGENCIES AT STATE AND LGA LEVELS

Name of interviewer:................................................................................................................................

Community/LGA: .....................................................................................................................................

Date/Time: ...............................................................................................................................................

Name of the Interviewee:.........................................................................................................................

Office: .................................................................................................

Posi�on: .................................................................................................

1. Briefly describe the tax laws and policies for informal sectors in Eki� State?...................................

............................................................................................................................................................

............................................................................................................................................................

............................................................................................................................................................

............................................................................................................................................................

2. Briefly explain the administra�on of taxa�on in the informal sector in Eki�?...................................

............................................................................................................................................................

............................................................................................................................................................

............................................................................................................................................................

............................................................................................................................................................

3. How long has these laws and policies

existed?.....................................................................................

4. Is there a classifica�on for the informal sector by type, size etc used for the administra�on of tax

in the State? If Yes, what is it? .........................................................................................................

............................................................................................................................................................

............................................................................................................................................................

5. How effec�ve are the laws and policies?...........................................................................................

6. What gap or lacuna do you think the laws and policies have at the moment?.................................


............................................................................................................................................................

............................................................................................................................................................

............................................................................................................................................................

7. Are the laws and policies implemented 100%?.................................................................................

8. What challenges do you encounter in implemen�ng the Laws and policies?...................................

............................................................................................................................................................

............................................................................................................................................................

............................................................................................................................................................

............................................................................................................................................................

9. Do the laws and policies have the inputs of the people during the making of the law and

policies?

............................................................................................................................................................

10. Are the laws/policies publicized and known to the people?..............................................................

11. What measure is Statutorily used to determine tax of informal sectors in the State?......... .............

............................................................................................................................................................

............................................................................................................................................................

............................................................................................................................................................

............................................................................................................................................................

12. How would you describe the reac�on of the people to taxes and tax enforcers in the State?

............................................................................................................................................................

13. What do you think are the effects of taxa�on on the people/informal sector in

Eki�?...................................................................................................................................................

............................................................................................................................................................

............................................................................................................................................................

............................................................................................................................................................

14. What do you think should be done to improve tax system in the State?..........................................

............................................................................................................................................................

............................................................................................................................................................

............................................................................................................................................................

............................................................................................................................................................

Appendix ii: Structured Ques�ons for the Informal Sector tax payers In Eki� State

Name of the interviewer:............................................................................................................


Community/LGA: ........................................................................................................................

Date/Time: .................................................................................................................................

Name of the interviewee: ..........................................................................................................

1. What type of business do you do?

........................................................

2. Are you aware of the sector you belong? Formal or Informal

.........................................................

3. How do you perceive Tax?

(a) Government money

(b) Ci�zens Contribu�on

(c) Voluntary dona�on

(d) Counterpart funds

(e) Unfair Extor�on

(f) Others (Please specify)........................................................................

4. How do you pay your tax?

(a) To the bank

(b) Directly to the tax collectors

(c) To other middle player

(d) To your associa�on Head

(e) Others (Please specify)........................................................................

5. Are you aware of the tax policies in the state?

(a) Yes

(b) No

(c) Just hearing

(d) Am not interested

6. Were your interests enlisted in the state tax laws and policies?

(a) Yes

(b) No

(c) I cannot remember

(d) We were not at any point called for dialogue

7. Are you aware of any tax policy in your local government?

(a) Yes

(b) No

(c) Not at all

(d) Par�ally aware


8. Do they accommodate your views in the tax policy?

(a) Yes

(b) No

(c) Par�ally

(d) Fully

9. Do you have idea of the different types of tax levied by the government?

(a) Yes

(b) No

(c) Yes. But cant differen�ate them

(d) No. But interested in knowing

9(b) Please list the different types of taxes.................................................

.....................................................................................................................

10. Do you perceive any irregulari�es in tax collec�on by the tax collectors

(a) Yes with examples.............................................................................

(b) Yes

(c) No

(d) Not yet

11. Have you ever bribed a tax collector rather than pay directly to the Government

(a) Always

(b) Occasionally

(c) No

(d) Never

12. Do tax collectors performs their du�es in friendly and civil way

(a) Yes some�mes

(b) Yes

(c) They will never

(d) No

13. Have you ever been harassed or in�midated by any tax collector?

(a) Always

(b) Never

(c) Yes

(d) No

14. What comes to your mind when you sight

tax collector?

(a) Imposters

(b) Friends


(c) Thieves

(d) Cheaters

15. Do you have difficulty understanding the tax collectors

(a) Yes. They are always strict

(b) No

(c) Some�mes

(d) Always

16. What is the evidence of payment issued on payment of taxes

(a) Printed receipt

(b) Wri�en sheet of paper

(c) Inscrip�on on shops

(d) Others (Please specify).....................................................................

17. Have you heard of the word TAX EVASION? and the penal�es a�ached

(a) Yes

(b) No

(c) Par�ally aware

(d) Completely ignorant

18. What are the challenges you iden�fy in the administra�on of Tax in Eki� State and the Local

Government?...............................................................

.....................................................................................................................................................

.....................................................................................................................................................

.....................................................

19. How about DOUBLE TAXATION?

(a) Yes

(b) No

(c) Not for once

(d) Just now

20. Have you ever ques�oned a tax collector as to

� What fixed amount to pay?

� What ra�onale for paying tax?

� If tax payment is correctly recorded and filed in appropriate files?

� What penal�es are a�ached to defaul�ng?

� How to derive development a�er paying tax


Appendix iii: A ONE DAY INTERFACE MEETING AMONG THE GOVERNMNENT OFFICIALS AND THE

INFORMAL SECTOR IN EKITI STATE ORGANIZED BY EKITI STATE TAX JUSTICE AND GOVERNANCE

PLATFORM SUPPORTED BY CIVIL SOCIETY LEGISLATIVE AND ADVOCACY CENTRE (CISLAC) On the

21st December 2016 @Divine Success Event Centre, 52 Basiri Iyin Road, Ado-Eki� Eki� State

Arrival: Par�cipants arrived to �me and registra�on commenced immediately by 9:00am. The

interface was facilitated by Mr. Oluseun Esan and Ogunlade Olamide Mar�ns both from New Ini�a�ve

for Social Development.

A�endance: New Ini�a�ve for Social Development, Eki� Tax Jus�ce and Governance Pla�orm,

Hoteliers Associa�on, Market Women Associa�on, Saw Millers and Tippers Union, Tailors’ Associa�on,

Luxury service providers. Others are the Drivers Union and other informal tax payers.

Focus Group The focus group of the workshop are the informal sector in Eki� State and the concerned government officials both at the State and the Local Government level to help address issues arising from tax administra�on of the informal sector. Opening Prayer: Opening prayer was said at 9:45am by one of the par�cipants Introduc�on Of Par�cipants: Par�cipants introduced themselves as well as the various associa�ons and Local Government they represent. Goodwill Message: The Goodwill message was delivered by the rate officer from Eki� South West Local Government. Mr Odewunmi Oladapo. He Lauded the efforts of the organisers and said the interface came at a very cri�cal �me in the history of the state where Government are finding it difficult to increase her tax net and the people are also reluctant to their obliga�ons. He said taxing the informal sector is important as they occupy a wider percentage of the economy and all effort to create synergy between government and the informal tax payers will always b e welcomed. Overview Of Informal Taxa�on In Eki� State: Presented By Mr. Olu’seun Esan

Mr. Olu’Seun Esan

Mr. Olu’seun Esan welcomed the par�cipants to the interface and took them through the goal of the

project and by extension the interface which is to conduct a well-researched report on the tax status,


policies and prac�ces in the informal sector in Eki� State clearly addressing impacts on subsistence

businesses and small players in the informal sector.

He said the informal sector is so complex that it has presented challenges of revenue mobiliza�on for

tax authori�es with some sec�ons successfully evading or avoiding taxes while there is a heavy burden

of payments by some other sec�ons of the same sector. The challenges of the sector is als o

acknowledged in the Na�onal Tax Policy, NTP, which stated that compliance has been a great problem

in the Nigerian tax system as a result of the large scale informal sector.

The sector, also referred to as a ‘hard to tax’ sector, therefore lacks a clea r policy for its taxa�on and

several levels of governments, especially at sub-na�onal and local government levels, introduced

mul�ples strategies of genera�ng taxes from the sector. These contributed to the exacerba�on of

poverty and widening of inequality as informal sector players-ar�sans, subsistence workers and

market women bear heavy burdens of arbitrarily imposed mul�ple levies, rates and charges,

some�mes collected using methods that are dehumanizing and causing bodily harm and in some cases

death to tax payers.

The interface among other things will help to understand the administra�on of taxa�on of the

informal sector in Eki� State as it affect all players in the sector, especially small scale ar�sans, traders,

including women and subsistence businesses, provide CSOs and Government with evidence of the

effect of taxa�on on the informal sector in Eki� State to inform advocacy and policy review, empower

workers in the informal sector of their tax liabili�es and mobilize ac�ve ci�zenship for right based

approach to tax administra�on and to increase awareness about tax issues in the informal sector in

Eki� State to encourage voluntary tax compliance and demand accountability in revenue

management.

According to him, the ideal tax system must ensure that taxes are based on proper assessment of size

and capacity, taxes are based on proper records kept , taxes are based on well documented and

publicized legisla�ons and policies and adequate documenta�on and circula�on of tax records and

impacts by the Government must be given special considera�on.

Experience Sharing: by the informal tax payers/informal sector and revenue agencies


Chief Korode (President Hoteliers Associa�on, Eki� State)

Hoteliers Associa�on: The president of the Hoteliers Associa�on Chief Korode laments at the present

level of tax administra�on in the State par�cularly as it affect their business. He said 13hotels have

presently closed down their opera�ons in the state owing to the huge amount of taxes levied at them.

According to him, Hotels in Eki� State are paying up to 10taxes ranging from tenement rate, commerce

and industry, tourism, environment and fumiga�on. Others are personal tax, signage, food allied test

and FIRS. Government is also coming up with emission tax, swimming pool test and SON test.

Tailor’s Union: A tailor from Eki� SW Ilawe said the manner at which revenue collectors carry out their

du�es is not acceptable, as most will prefer to be forceful and uncaring. To her, the size of her shop

determines the amount to pay and this is not a fair scale of measurement as mostly her goods her

purchased on borrowed funds. They wish to know if there is flat rate in the taxes paid by the tailors in

the State and how the issue of environmental tax irregularity could be managed.

Mrs Grace Giwa sharing her experience

Responding: Environmental tax irregulari�es are subject to the ignorance of the people and

Government at all level must see to the sensi�za�on of the populace. Categoriza�on of ci�es do es

cause irregulari�es.

Drivers Union: The drivers at the mee�ng said the issuance of emblem and its management have been

a problem close to permanent for them as they are o�en been shortchanged in the process of its

acquisi�on. They further asked why Government will not always enlist their interests through dialogue

before coming up with levies. The drivers talked also on vehicle renewal being too expensive in Eki�

State compared to the neighboring state of Kwara and that drivers prefers to obtain the documents

from where it is cheaper. Rate for loading vehicles are also high in Eki� State where they pays #12,000 -

#13,000 unlike in Kwara where only #7,500 is being paid for similar opera�on. Also of note is the

amount of obtaining a drivers license which is presently between #12,000 -#15,000.


A Driver from Ilejemeje LGA sharing his experience

Responding: the Local Government Rate Officer said that revenue alloca�on of emblem is subject to

the route to be plied by the drivers as drivers plying differe nt routes will need to collect a bulky

emblem that will give them access. He further advised that drivers should sensi�ze their members on

the correct number of documents they are expected to have and even go further by numbering them.

Tippers Union: They pay five hundred naira for emblem and different forms of taxes are paid to the

ministry of mines and steel. They however said a review of the payment is necessary.

An execu�ve of the Tippers and Quarry sand suppliers Union

Hairdressing Associa�on: They pay to both Local Government and State Government through the

ministry of commerce and industry and the ministry of environment. State Government o�en comes

up with various means of genera�ng money from them by organizing seminars that have no direct

importance or effect on them. Also, they pay associa�on dues to the Government #1000/per head

un�l recently when the leadership of the associa�on decides to pay collec�vely as a body.


President, Hairdressers’ Associa�on of Eki� State. Alhaja Bello Khadijat.

Responding: Unfaithfulness from the informal sector makes collec�on difficult for Government as

some hides under their associa�on to evade tax. Union leaders also mislead the Government on the

actual number of members in their union.

Group Picture taken at the research Data Gathering interface between Tax payers and Tax

Collectors

Presenta�on Of Findings: This session was anchored By Olu’Seun Esan, the session detailed the findings from the field from the research for confirma�on by par�c ipants. The par�cipants agreed with the findings and made inputs on the recommenda�on and it was well captured.


The par�cipants were thankful of the opportunity to bare their minds on tax administra�on in the State and looked forward to sustained dialogue and interface in the future.


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A RESEARCH REPORT ON TAXATION OF THE INFORMAL SECTOR...

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