The International Monetary Fund (IMF) has told Nigeria to cut down on its tax exemptions and incentives list.
The IMF also told Nigeria to pursue aggressive tax reforms and that should include raising excise taxes and expanding same.
Cathy Pattillo, the Assistant Director, Fiscal Affairs Department, IMF, made the recommendation yesterday at the IMF Fiscal Monitor report release press briefing at the ongoing IMF/World Bank Group spring meetings in Washington DC, United States.
She said these reforms are critical if Nigeria must improve its non-oil revenue to GDP currently at about 3.4 percent, which is one of the lowest in the world.
The advice of IMF is coming on the heals of the Nigeria’s private sector criticisms of it’s earlier recommendation that Nigeria should raise its value added tax (VAT) from the current 5 percent.
“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,’’ she said.
“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” she said.
Ms. Pattillo noted that tax reform in Nigeria is very important issue and one of the IMF’s main recommendations for Nigeria is the need for comprehensive tax reform that would sustainably increase non-oil revenue.
“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,” she explained.