Business

Again, IMF urges Nigerian govt to diversify nation’s revenue base

The International Monetary Fund (IMF) has called on the federal government to urgently review its tax policies to block leakages and diversify its revenue base.

IMF Mission Chief and Senior Resident Representative in Nigeria, Amine Mati, who made the call at the 2018 Nigerian Economic Summit (NES) in Abuja on Tuesday, said the country should emphasise on taxing the richest three percent of the country’s population.

Mati maintained that the policies should targeted at widening the tax base and increasing compliance on Value Added Tax (VAT), adding that the measures would help increase the nation’s revenue base significantly.

“In terms of non-oil revenue, at four to five percent of GDP, this is very low. Though, it is important to note that the government is working to improve on this.

“In Nigeria, excises only bring 0.1 percent of GDP. This is one of the easiest sources of revenue to get. 0.1 percent of GDP compared to three percent of GDP compared for ECOWAS and most other countries.

“In terms of proper tax collection, excise in Nigeria is only 2.3 percent. This tells you how much potential there is in trying to get revenue up. Some of the recommendations here is to have specific excise — such as excise in fuel products, excise on luxury goods, including on airtime fees.

“We just need some small simulation on that. That would give you 0.8 percent of GDP within a year; that is money you can spend on import and development spending,” the representative of the global lender said.

Mati noted that the percentage of active tax complaint Nigerian was 5 percent, while 97 percent of VAT filers represent three percent of the VAT revenue.

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He said, “Compliance in Nigeria is low, about 20 to 25 percent. If you were to double compliance to 50 – 60 percent, you would double VAT collection. Again, each percentage point increase in VAT rate would get you 0.4 percent of GDP, but that doubles once you get the compliance up.

“Increasing VAT and at the same time putting some social transfer, you can have some net revenue gain that would be important and would not worsen poverty. To increase revenue, tax policy is necessary, but revenue administration, in both tax and custom administration measures are essential, they need to accompany that.

“The active tax population in Nigeria is six percent, whether you look at it from the Company Income Tax, CIT, or VAT or others. Now there is the taxpayers’ registration database that needs to be improved, while the weaknesses in the compliance risk management base. It is important to increase the base.”

Vice President Yemi Osinbajo had in May attributed poor tax management as one of the issues that increased corruption in Nigerian system, pointing out that the country still has a long way to go in catching up with the rest of the world in terms of tax compliance

According to Osinbajo, the number of active tax complaint Nigerians rose to 19 million in May 2018 from 14 million in May 2017.

 

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