Focus on Improving Tax Collection Efficiency, IMF Tells FG

The International Monetary Fund (IMF) has said the Federal Government should focus on improving tax collection efficiency and not raise the nation’s taxes given the current economic situation.

Speaking at a virtual conference on Thursday, Jesmin Rahman, the IMF Mission Chief to Nigeria, said “Before you go about raising taxes, we need to first make sure that we collect everything that is collectible.”

“At the moment, Nigeria has a very low tax efficiency rate,” Rahman said.

Experts have said Nigeria’s tax-to-GDP ratio is one of the lowest in the world at about 7 percent.  This was despite the Federal Government raising Value Added Taxes (VAT) from 5 percent earlier this year to 7.5 percent. Suggesting that a large number of Nigerians are not paying taxes as demanded by the constitution.

Therefore, Rahman said the nation’s low revenues is weighing on its ability to service debt and sustain infrastructural growth despite having a low debt to GDP ratio.

“Even though the debt level itself is not a concern for sustainability, it’s servicing capacity is severely constrained and requires a close watch,” she said.

“Nigeria’s public debt was at 29 per cent of GDP in 2019 in our definition of all known liabilities like the Central Bank of Nigeria (CBN) financing of the budget, financing of the power sector, Asset Management Corporation of Nigeria (AMCON) debt and everything came to 29 per cent of GDP.

“We project this to increase to 36.5 per cent this year, which is a jump and then stay around 38 per cent of GDP in the medium term,” she said.

Nigeria’s debt service to revenue ratio rose to 99 percent in the first quarter of 2020, according to the Debt Management Office (DMO).