IMF backs Nigeria on VAT, tax increase

The International Monetary Fund (IMF) has thrown its weight behind the planned increase in Value Added Tax (VAT) by the Federal Government.

The Organisation also encouraged the country look into increasing other forms of taxes, from non-oil revenues, as a means of raising more funds.

This was disclosed on Wednesday in a press release after the conclusion of the IMF Executive Board 19 Article IV Consultation with Nigeria.

The Executive Directors said with 2.5 percent in the medium term, and with population growing at a faster rate, growth per capital will be less than zero percent.

The statement read in part, ‘’They welcomed the authorities’ tax reform plan to increase non-oil revenue, including through tax policy and administration measures.

‘’They stressed the importance of strengthening domestic revenue mobilization, including through additional excises, a comprehensive VAT reform, and elimination of tax incentives. Securing oil revenues through reforms of state owned enterprises and measures to improve the governance of the oil sector will also be crucial.’’

It also called on the Central Bank of Nigeria (CBN) to stop its direct intervention in the foreign exchange market.

“They stressed the importance of strengthening domestic revenue mobilization, including through additional excises, a comprehensive VAT reform, and elimination of tax incentives.

“Directors highlighted the importance of shifting the expenditure mix toward priority areas. They welcomed, in this context, the significant increase in public investment but underlined the need for greater investment efficiency.

“They also recommended increasing funding for health and education. They noted that phasing out implicit fuel subsidies while strengthening social safety nets to mitigate the impact on the most vulnerable would help reduce the poverty gap and free up additional fiscal space.”

The Directors also emphasized the need to strengthen governance, transparency, and anti-corruption initiatives, including by enhancing AML/CFT and improving accountability in the public sector.

‘’Directors also recommended establishing a credible time bound recapitalization plan for weak banks and a timeline for phasing out the state backed asset management company AMCON,’’ part of the release stated.