The International Monetary Fund (IMF) has told Nigeria to pursue aggressive tax reforms, specifically urging the Federal Government to cut down on its tax exemptions to businesses and incentives list.
According to the IMF, the Government needs to change the way taxes are collected.The recommendation was made yesterday by the Assistant Director of IMF‘s Fiscal Affairs Department, Catherine Pattillo. She was speaking during the IMF Fiscal Monitor Report release press briefing, at the ongoing IMF/World Bank Group spring meetings in Washington DC, United States.
She also advised that Nigeria’s excise taxes should be raised and expanded.
“There is an emphasis also on improving excise taxes. And I think there have been some steps in that direction, but there is scope for the coverage of excises to other goods and also higher rates on excises.”
“Another area is aggressive streamlining of tax incentives and exemptions. So there has been in Nigeria an effort with the strategic revenue growth initiative, looking at the comprehensive approach to tax reform, and this is very welcome.” -Pattillo
Why IMF want Nigeria to cut tax exemptions and incentives
It is all due to the poor contribution of the non-oil sector to the Gross Domestic Product. According to IMF, Nigeria’s non-oil revenue to GDP is currently at about 3.4 percent, which is one of the lowest in the world.
To improve the non-oil revenue to the GDP, IMF said Nigeria has to undergo tax reforms.
“The reason why that is needed is that Nigeria has one of the lowest ratios of non-oil revenue to GDP at around 3.4 percent in the world and the total tax revenue to GDP of around 8 percent is also low compared to its peers.”
IMF had previously asked that the Nigerian Government increase the Value Added Tax, which is one of the ways the Federal Inland Revenue Service (FIRS) intends to finance the new minimum wage.
