The informal sector of a nation’s economy is usually considered to be a highly unregulated sector, primarily because it is comprised of workers and businesses that are unregistered and thus difficult to monitor. The informal sector is so called under tax regimes because it is outside the tax net, especially for the payment of income taxes by its teeming operators and workforce.
However, under careful scrutiny, it is not entirely accurate to allege that the informal sector players absolutely do not pay any form of tax. If the value-chain of production and consumption is properly traced, we find that the workers in the informal sector do pay VAT for goods purchased from businesses in the formal sector. These VAT payments, in actuality, are a form of tax that they pay from their income, although the emphasis here, as is often the case, is that they do not pay direct income tax.
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AN ECCENTRIC PROPOSITION FOR THE TAXATION OF THE INFORMAL SECTOR IN NIGERIA
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