The International Monetary Fund has advised the Federal Government to urgently revisit tax holidays and exemptions given to companies. It specifically urged Nigeria to implement a reform that would see it phase out tax holidays and exemptions eroding the Company Income Tax base.
Successive governments had granted controversial tax holidays and waivers, which were described as forms of corruption.
The Washington-based Fund also asked the Federal Government to increase taxes imposed on tobacco and alcohol, emphasising the need for socially responsible fiscal adjustment based on revenue mobilisation.
Senior Resident Representative and Mission Chief for Nigeria, Africa Department, IMF, Mr. Amine Mati, who said this in Lagos on Saturday, also stated that the Federal Government needs to reduce interest payments on borrowed funds to about 30 per cent of the country’s revenue.
According to Mati, there is also a need for Nigerian policymakers to move beyond voluntary compliance measures in tax matters in order to mobilise non-oil revenue and increase the fiscal space.
The IMF chief spoke while making a presentation at a forum organised by the Chartered Institute of Bankers of Nigeria.
In the presentation, he stressed the need to embark on full Value Added Tax and broaden it.
On monetary policy, Mati welcomed the recent “de facto” tighter monetary policy stance and said there was a need to “stop the financing of the central bank to the government and strengthen the monetary policy framework.”
On exchange rate, the IMF chief told the Central Bank of Nigeria that the “recent introduction of the Investors and Exporters FX window is welcomed and there is a need to address market segmentation; remove FX restriction; simplify/unify the FX market; and improve operations of the FX market in line with market fundamentals.”
Mati said there were significant economic headwinds amid challenges and elevated risks for the country.
He noted that the Federal Government’s Economic Recovery and Growth Plan was an important step forward, adding that important policies and steps had been taken but policy action remained urgent.
“Comprehensive policy package is needed, including front-loaded non-oil revenue mobilisation, greater exchange rate stability.”
