…Seeks further forex market liberalisation
From Amechi Ogbonna, Washington DC, USA
Despite recent tax reforms by the Federal Government, the International Monetary Fund ( IMF), at the weekend, expressed displeasure over Nigeria’s poor tax revenue records, describing its tax to GDP figures as one of the lowest in the world.
The Fund then warned that unless the situation is urgently improved, governments’ ability to effectively finance infrastructure and meet other pressing socio-economic obligations would continue to be constrained.
Its Director of African Department, Mr Aemro Selassie, who spoke at a briefing on the sidelines of the annual meetings of the IMF and the World Bank, in Washington DC, United States, stressed the need for a more comprehensive tax reform that would raise the amount of taxes coming into government’s coffers, in view of the enormity of the country’s infrastructure challenges.
He noted: “I think that the Ministry of Finance has identified quite a few steps that could be taken by way of tax administration and making sure that people are paying the taxes that they are meant to be paying, and whether or not identifying and taking action. But our guess is that there is also going to be need for tax policy changes to enable Nigeria, which has ow level of revenue mobilisation, to improve that”
Selassie pointed out that this has become necessary because the country requires very huge resources to help strengthen investment in infrastructure including building schools, hospitals and developing its human resources.
He further said the IMF would be available to advise and provide technical assistance to the country on how to do this in a progressive way .
Vice President Yemi Osinbajo, had on June 29, signed an Executive Order backing the implementation of the Voluntary Asset and Income Declaration Scheme (VAIDS), which took effect from July 1 2017 and will lapse on March 31, 2018. The scheme which is to be jointly executed by the federal and state governments covers both corporate and individual taxpayers.
The Order was pursuant to the approval-in-principle granted by the National Executive Council in respect of the implementation of VAIDS earlier in the year. The government expects to raise at least $1 billion in tax revenues through it, using the scheme to increase tax awareness and compliance, and reduce incidence of tax evasion in the country. Under the scheme, taxpayers have been given a time-limited opportunity to regularise their tax status without incurring any penalties.
“You know taxes are collected from people that are rich, the richer segment of the society, rather than the poor, pays tax and so there is a lot of technical work to be done here.” He added.
While noting the critical decision on tax reforms would always be taken by the Nigerian government and its National Assembly, he said IMF would be ready to provide the needed technical assistance to help the country make a success of the reform.
On developments in the foreign exchange market, the IMF director expressed delight at the narrowing of the gap between the official and parallel market rates over the past four months but underscored the need for further liberalization of the market.
He said: “Ultimately I think the objective we used to have before has to be in creating a liquid and deep single foreign exchange market and reforms towards that directions going forward would be helpful. But beyond that, the fiscal side needs to further improve the allocation of foreign exchange system.”
On agriculture, Selassie stated that given the size of the Nigerian economy, and the potential that it has including agriculture, it is a sector that should be doing better.
“I think it is important to help government to invest in health, education and building infrastructure that is going to be important for other sectors like agriculture . Some processing is going to be important too and so addressing the energy issues require a lot of public investment . So revenue mobilization is important.” He said
The other issue is policy uncertainty, adding that without energy it will be difficult to have higher productivity activities taking place in some sectors including agriculture .