Washington DC — The International Monetary Fund (IMF) has once again identified the removal of tax exemptions by Nigeria as one of the many strategies to increase government revenues for increased spending on infrastructure and social safety net.
Recall that the IMF had in 2017, advised the Federal Government to urgently revisit tax holidays and exemptions given to companies.
It specifically urged Nigeria to implement a reform that would phase out tax holidays and exemptions which, it said, were eroding the Company Income Tax base.
Catherine Patillo, an assistant director, Fiscal Affairs department of the IMF at the launch of the Fiscal Monitor report at the ongoing spring meeting in Washington said: "You have seen the most recent IMF staff report on Nigeria which was emphasizing that with a constraining debt servicing as you know, the ratio of federal government interest payment to debt revenue is extremely high at 63 percent, so there is a need to build revenue so that you have more space to spend for infrastructure, social safety nets etc otherwise interest is eating up most of your revenue so building revenue is key and how do you do that?
"The recommendation in the IMF staff report is to broaden the tax base by removing exemptions, to rationalize tax incentives in particular to strengthen tax compliance and our recommendation to raise the VAT rate. So those were the recommendations for Nigeria on tax."
The Nigerian Government has over the years put in place many different and overlapping incentive schemes to attract both local and foreign investment.
Tax exemption is generally regarded as an industrial investment device; many developing countries like Nigeria offer it as one of their major incentives.