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IMF wants Nigeria to double VAT, adopts comprehensive tax reforms

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The International Monetary Fund (IMF) has canvassed the implementation of tax administration reforms by Nigeria and urged the country to consider adjusting tax rates to levels comparable to the average in the West Africa sub-region.

In its Staff Concluding Statement of the 2022 Article IV Mission, while commending the steady implementation of the tax automation system (TaxPro Max) and recommended stepping up efforts to further expand coverage under a well-designed road map.

It said Nigeria should strengthen taxpayer segmentation centering on the Large Taxpayer Offices (LTOs).

IMF also advised Nigeria to increase the VAT rate to 15 percent by 2027 in steps while streamlining numerous VAT exemptions based on systemic reviews.

Nigeria, the Fund said should also increase excise rates on alcoholic and tobacco products while broadening the base, and rationalizing tax incentives by streamlining tax expenditures based on comprehensive periodic reviews.

“Step up implementation of tax administration reforms. 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 road map 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 program, 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.

“Adopt tax policy reforms. The mission advised the authorities to consider adjusting tax rates to levels comparable to the average in Economic Community of West African States (ECOWAS) as compliance improves.

“This includes further increasing the VAT rate to 15 percent by 2027 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 IMF stated in the report.

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