Monday, April 15, 2024

IMF wants Nigeria to raise VAT to 15% by 2027

The International Monetary Fund has advised Nigeria to adjust tax rates to levels comparable to the average in Economic Community of West African States (ECOWAS) as compliance improves.

According to the IMF, one of the ways to achieve the proposed target is to increase Value Added Tax rate to 15 percent by 2027. The staffs of IMF which concluded their mission to the country in November said “this should be done in steps while streamlining numerous VAT exemptions based on systemic reviews, increasing excise rates on alcoholic and tobacco products while broadening the base, and rationalizing tax incentives by streamlining tax expenditures based on comprehensive periodic reviews.”

The mission welcomed the steady implementation of the tax automation system (TaxPro Max) and recommended stepping up efforts to further expand coverage under a well-designed roadmap and strengthen taxpayer segmentation centering on the Large Taxpayer Offices (LTOs).

In the medium-term, the authorities should develop a compliance improvement program and comprehensive customs modernization programme, improve the effectiveness of the State Internal Revenue Service’s administration of the Pay-As-You-Earn (PAYE) system, and strengthen inter-agency coordination and data sharing.

As a near-term priority, the mission highlighted the urgent need to remove fuel subsidies fully and permanently, which disproportionately benefit the well-off, by mid-2023 as planned. The government should also prioritize addressing oil thefts and governance issues in the oil sector to restore production to pre-pandemic levels.

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