The World Bank has stated that Nigeria can implement economic and revenue reforms which would raise the country’s revenue to N10 trillion in 3 years and raise tax to GDP ratio to 7%.
This was disclosed by Mr Rajul Awasthi, Senior Public Sector Specialist at the World Bank on Domestic Revenue Mobilisation at a virtual media summit in Abuja on Thursday, according to the News Agency of Nigeria.
He added that in the long term, reform of the tax system will be a necessity to stimulate post-pandemic investment and economic growth as policy reforms with revenue growth enhancement are needed for Nigeria to increase revenue generation.
“As Nigeria tries to build back better after the COVID-19 crisis, the approach to revenue mobilisation needs to be more strategic.
Not just taxing more, but taxing better; not just how much to collect, but how to collect, what to collect, and from whom,” he said.
He added that Nigeria’s revenue sources had been further hit hard by COVID-19 and in 2020 Nigeria recorded its deepest quarterly contraction since the 1980s, but exited the recession in the fourth quarter of that year.
“Safeguarding and mobilising revenues was necessary but needed to be designed so that investment, growth and jobs do not suffer.
Also, reprioritising public spending to protect critical development expenditures and supporting economic activity and access to basic services and providing relief for poor and vulnerable communities were essential,” he said.
He said that there were key areas of reform to improve revenue mobilisation as they had the potential to raise N4 trillion to N6 trillion. These key areas include excise reforms through policy measures, property tax reforms by updating/completing property records and Value-Added Tax (VAT) administration and plugging compliance gaps.
Others are Personal Income Tax (PIT) revenue-raising measures and access to data and rationalising tax expenditures in Corporate Income Tax (CIT).
According to him, revenue mobilisation can be sequenced into immediate, medium and long term.
He added that in the short term, Nigeria could enhance excise rates on “sin goods” and establish excise on petrol and diesel at a token rate, while in the medium term, emphasis could be placed on rationalising tax expenditures and in the long term, it could improve revenue from cross border transactions and other international tax measures.
“Internally Generated Revenues (IGR) should be intensified as efforts are needed to improve States’ collection of PIT and other taxes such as the property tax,” he said.
“The Federal Government should address policy and compliance gaps in VAT as Nigeria has much greater revenue potential from VAT than currently achieved,” he added, citing that the total additional VAT potential could be N3.1 trillion or more.
In case you missed it
The World Bank stated that Nigeria can kick-start its economic growth by reforming the power sector, citing that the present power policies of the Federal Government need to be deepened through a combination of upstream and downstream interventions.
The statement was made in the bank’s bi-annual Nigerian Development Update, titled: “Resilience through reforms”.