Business Idea #11 – Digital System for Informal Sector Tax Collection (Remita for Tax)

The ideas are archived here.

The Problem

According to a recent report by Economic Confidential, a publication, most Nigerian states are not economically viable. The report showed that only three states in the entire Northern region have IGR (internally generated revenue, IGR) above 20 per cent. They are Kwara, Kano, and Kaduna States. Ten states in the South recorded over 20 per cent IGR in 2017. They are Lagos, Ogun, Rivers, Edo, Enugu, Delta, Cross River, Anambra, Oyo and Abia States. With dwindling receipts on crude oil sales, most Nigerian states have a big problem: improve IGR or become insolvent.

The Opportunity

It is evident that states have to improve IGR. Today, the strategy has focused mainly on big companies and ventures within the corporate Nigeria – i.e. companies registered with CAC and operating with known locations.  In other words, medium scale enterprises and the top leading entities are the ones paying most of the taxes. The carpenters, mechanics, tailors, farmers, etc are largely ignored. Unfortunately, most of those participants, usually in the informal sector, are making money. Furthermore, government has not improved how to collect taxes from most web companies. Today, you can be living and running a business in Nigeria with your bank account where all payments are received in Silicon Valley Bank through Stripe Atlas.

Action Roadmap

Build a tax collection system that makes it possible for state governments to collect the right components of their taxes from hotels, carpenters, tailors, web companies, etc. Think of Remita for tax collection. IGR includes Pay-As-You-Earn Tax (PAYE), Direct Assessment, Road Taxes, and revenues from Ministries, Departments and Agencies (MDA)s. You have to figure out how to make sure states can collect the money without crippling the companies. It must not include intrusive system but something that can even use mobile money or SMS to ensure these informal sector participants pay.

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