Nigeria Could Generate Extra N10trn from Revenue Reforms –W/Bank

Nigeria Could Generate Extra N10trn from Revenue Reforms –W/Bank

Nigeria could generate an additional N10 trillion and raise its tax as a percentage of gross domestic product (GDP) ratio to 7% over the next three years if Federal Government can initiate certain revenue reforms, says the World Bank.

Rajul Awasthi, Senior Public Sector Specialist at World Bank, said this in a presentation on Domestic Revenue Mobilisation at a virtual media parley in Abuja on Thursday.

In his presentation, he explained that in the long term, fundamental reform of the tax system will be needed to stimulate post-pandemic investment and economic growth.

According to him, coordinated policy reforms combined with revenue administration enhancements are essential to achieve revenue growth potential.

“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 that the economy and 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.

However, mitigating the impact and laying the foundation for a strong recovery requires several policy responses, including mobilising revenues.

Recommending some measures, he said that managing COVID-19 outbreak was important while enhancing macroeconomic management to boost investor confidence.

He added that safeguarding and mobilising revenues was necessary, but needed to be designed so that investment, growth and jobs do not suffer.

Also, re-prioritising 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.

Awasthi said there were key areas of reform to improve revenue mobilisation as they had potential to raise N4 to N6 trillion.

They are 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.

For immediate, it could enhance excise rates on “sin goods” and establish excise on petrol and diesel at a token rate.

For medium term, emphasis should be placed on rationalising tax expenditures and in the long term, it could improve revenue from cross border transactions and other international tax measures.

He also said that Internally Generated Revenues (IGR) should be intensified as efforts were needed to improve States’ collection of PIT and other taxes such as the property tax.

According to him, there is ample space to raise excise rates for alcohol and cigarettes as Nigeria’s excise rates are lower than those of its peers.

Awasthi said that the Federal Government should address policy and compliance gaps in VAT as Nigeria had much greater revenue potential from VAT than currently achieved, adding that total additional VAT potential could be N3.1 trillion or more.

He, however, said that for all tax categories, enhancing data management was essential to develop and maintain robust tax expenditure analysis. He added that these estimates would be needed to understand the fiscal impact.

Nigeria Could Generate Extra N10trn from Revenue Reforms –W/Bank