Taxing Times: Taxation, Divided Societies and the Informal Economy in Northern Nigeria

Abstract

This paper challenges the notion that taxing the informal economy provides a mechanism for increasing popular political voice and rebuilding the social contract. It contends that current arguments for taxing the informal economy suffer from a Eurocentric understanding of taxation and state formation, and a fiscally essentialist and undifferentiated notion of the informal economy. Drawing on fieldwork in northern Nigeria, this paper shows that history, gender, wealth and ethno-religious identity influence how taxing the informal economy shapes governance outcomes. Evidence from Nigeria suggests an inverse relationship between informal economy taxation and political voice, posing the risk that increased taxation will exacerbate social divisions rather than rebuild the social contract.

Acknowledgements

I would like to thank the Nigeria Research Network (NRN), University of Oxford, and the Netherlands Ministry of Foreign Affairs for organising and funding earlier research carried out through the Islam Research Programme (http://www.qeh.ox.ac.uk/research/research-networks/nrn). This paper emerged as a side issue that arose from that research. The data from the Islam Research Project will be made available on the NRN website. I would also like to thank Mal. Yahaya Yakubu for his able research assistance as well as the editors and two anonymous reviewers for their useful comments. Any errors that remain are my own.

Disclosure statement

No potential conflict of interest was reported by the author.

Notes

1. Northern Nigeria was written with a capital ‘n’ until the creation of states in 1967 changed it from a political unit into a general regional designation.

2. The activities of secluded northern Nigerian women were not included in the study owing to the logistical complexities of access, and the distinctive issues of taxing activities carried out within the private domain.

3. Owing to security problems linked to Islamic extremism, motorcycle taxis have been banned in both Kano and Kaduna since the time of fieldwork.

4. The Naira exchange rate was N160 to $1 at the time of the research (October 2011–April 2014).

5. While their members are informal, associations are often registered and can operate as legal entities.

6. These figures include basic tax and self-help rates only, net of supplementary dues and levies, which respondents were unable to estimate.