The report of a baseline study on ‘Informal Sector Tax Practices in Lagos State’ carried out by the Community Life Project, a civil society organisation, has shown that the system of taxation practised in the state was “burdensome and inimical” to the survival of businesses in the informal sector in the state.
Findings of the survey which was conducted in May, 2017 was presented in Lagos, at a one day Research Validation Workshop on Informal Sector Taxation in Lagos State, organised by Community Life Project, with support from USAID.
According to the report, three Local Governments in Lagos State were selected for a pre-test while four Local Government Areas and four Local Council Development Areas were systematically selected for the main survey and a total of 1’ 387 questionnaires were randomly administered on selected respondents.
The survey stated that the informal sector “is viable for taxation” in the state given the volume of people and businesses/income in the sector, noting that quite a lot of people and businesses operate in the sector and generate substantial income which can better help the government generate tax revenue/resources.
It dispelled the belief that most people opted to be in the sector due to illiteracy and laziness, stressing that most of them were there because they wanted to be their own bosses; loved to be employers of labour; and wanted to gather money. It added that it was because the sector “is easy to enter; it is more flexible and dynamic; it is lucrative and because there are no jobs in the formal sector.”
The study further revealed that people in the informal sector were not averse to tax, noting that “they do not only believe that informal sector operatives should pay tax, they believe everybody, irrespective of the sector, should pay tax. Hence, majority of informal sector operatives are of the view that government can generate substantial income from the sector to drive development in the LGAs/LCDAs.”
It also disclosed that most of the informal people perceived taxes as very uncertain and constantly changing and that, strategies of tax enforcement were “aggressive, abusive and violent.”
According to the report, transparency and accountability were poor in the tax system, and the voices of the actors in the sector are also not heard and appropriated. It added that most of the people do not know how their tax exposures are calculated; that the sector’s players do not know how and where to find out about their tax exposures; and that the approved rates and levies are not conspicuously displayed.