Jaiye & Co. (Chartered Accountants)
11 Edith Muhammad Street
Ojodu, Lagos
October 13, 2021

To: Chairman, MATS State Board of Internal Revenue
Odo-Eran, Nigeria

Subject: Assessment and Collection of Taxes from Self-Employed Taxpayers

We refer to our appointment as Consultant to MATS State Internal Revenue Service for advisory services on the above subject.

Self-employed taxpayers are individuals or groups engaged in business as sole traders or in partnerships, including contractors, traders, professionals, market vendors, artisans, and more, all taxable under the Personal Income Tax Act CAP P8 LFN 2004 (as amended).

a. Constraints in Assessing and Collecting Taxes from Self-Employed Taxpayers

1. Lack of Data and Information: Limited database for self-employed individuals makes it difficult to integrate them into the tax net.
2. Inefficient Utilization of Tax Revenue: Apathy to voluntary tax compliance due to poor public infrastructure discourages tax payments.
3. Tax Evasion and Avoidance: Self-employed individuals often evade taxes more easily than salaried employees, necessitating anti-avoidance provisions.
4. Lack of Experienced Personnel: A shortage of skilled tax professionals complicates accurate assessments for self-employed taxpayers.
5. Inadequate Penalties and Enforcement: Current penalties are not stringent enough to encourage compliance, and enforcement is lacking.
6. Poor Record-Keeping: Many self-employed individuals lack organized records, mixing business with personal finances, complicating tax determination.
7. Public Awareness Deficit: Taxpayers are often unaware of their obligations, making it essential to enhance tax education efforts.
8. Corruption: Some tax officials collude with taxpayers, resulting in loss of government revenue.
9. Poverty Levels: Economic hardships mean that many self-employed individuals struggle to pay taxes, as it may further burden low-income earners.
10. Dependence on Oil Revenue: The long-term focus on oil has led to the neglect of non-oil revenue sources.

b. Strategies for Expanding the Tax Net to Improve Collection from Self-Employed Taxpayers

1. Public Education and Awareness: Aggressive campaigns to educate self-employed individuals on their tax responsibilities.
2. Enforcement of Withholding Tax: Companies should be encouraged to implement withholding tax, capturing more self-employed in the tax net.
3. Requirement for Tax Clearance Certificates (TCC): Enforcing TCC requirements for transactions with government agencies will increase compliance.
4. Stiffer Penalties for Non-Compliance: Introducing stricter consequences for non-compliance will motivate voluntary tax adherence.
5. Formation of Cooperative Unions: Encouraging artisans to form associations provides easier access to reach self-employed groups for tax purposes.
6. Effective Utilization of Tax Revenue: Visible improvements in infrastructure will encourage taxpayers as they see their contributions utilized effectively.
7. Anti-Avoidance Legislation: Enacting provisions to close loopholes in tax laws will discourage tax avoidance practices.
8. Use of Technology: Deploying advanced technology will streamline tax collection and reduce evasion.
9. Investigation and Intelligence Units: Leveraging intelligence units to track self-employed individuals, using resources like land registries and banking records.
10. Hiring Qualified Personnel: Employing skilled professionals and offering competitive pay will improve dedication and tax revenue.
11. Frequent Updates to Tax Laws: Regular updates to tax laws will simplify compliance, closing outdated provisions that enable evasion.

Please contact us for further assistance on any matters related to the above.

Yours faithfully,
Bunmmy AY
For: Jaiye & Co (Chartered Accountants)