At the ongoing IMF/World Bank Spring meetings happening in Washington DC, the International Monetary Fund (IMF) has reemphasized that Nigeria should double its efforts to ensure payment of taxes from more people and organizations, increment of taxes, and reduction of the country’s debt rate. A suggestion by the Fund also advised that the country rules out the controversial petrol subsidy and reverse the funding to targeted subsidies that foster significant development such as health and education.
Speaking concerning the latest Fiscal Monitor of IMF, with the title, “On the path to Policy Normalisation,” Division Chief of the Fiscal Affairs Department, IMF, Paulo Medas, said that Nigeria requires a medium-term plan that would ensure stable reduction of debt vulnerabilities; this has not happened due to Nigeria’s poor tax revenues. Low tax revenues increase the country’s vulnerability to tightening global situations. Tax increment would create space for debt management and fund allocation for other national priorities.
Country has one of the lowest tax revenues worldwide.
In the past, Nigeria has not so much benefitted from the unexpected fall of oil prices due to its direction of a lot of it to untargeted energy subsidies. Adjustment to other subsidies would therefore lead to reduce of the fiscal deficit. When this is achieved, resources can be used on other priorities that can drive significant growth in the future — like health and education — and enable reduction of deficit. Medas highlighted that tax revenue in Nigeria is one of the lowest in the world, so priorities should be placed on improvement of tax compliance and tax brackets.
IMF, in the Fiscal Monitor report, stated that low-income developing countries have experienced several global shocks, with an inclusion of the COVID-19 Pandemic and the crises of cost of living and food security, which have negatively impacted their public finances. At an average 4.2 percent of Gross Domestic Product (GDP), fiscal deficits in these countries revealed moderate improvement owing to the effects of the pandemic. Increment of fuel subsidies and social spending by countries as response to increasing prices of energy and food import has aided stability of primary spending at 16.9 percent of GDP, on average.
Over 35 countries are either in or near debt distress.
According to the report, there is a projection of continuous rising of debt in some low-income countries, as Nigeria and others have requested debt relief under the Group of Twenty (G20) Common Framework (Chad, Ethiopia, Ghana, Zambia). Victor Gaspar, Director, Fiscal Affairs Department at IMF, commenting on the global perspective, highlighted the complexity of the near-term outlook amid current high inflation, increasing debt and tightening financing conditions. Policymakers are advised to prioritize consistency of fiscal policy with central bank policies to enhance promotion of price and financial stability.
In Gaspar’s statement, reduction of debt vulnerabilities and rebuild of fiscal buffers have been the most important priority for a while. Regardless of the projected gradual fiscal tightening in the future, the director stated that there will be a rise in global public debt, propelled by some advanced and developing market economies. Debt vulnerability concerns have seriously grown in many countries. Higher borrowing costs have affected the public finances of low-income developing countries as over 35 countries are either in or near debt distress.
International cooperation will resolve unsustainable debt burdens.
To reduce debt vulnerabilities and develop necessary room to address future shocks, countries are advised to build enhanced risk-based fiscal frameworks. Combination of strengthened institutions with revised fiscal rules will be done by the fiscal frameworks. Inclusion of credible policy commitment for achievement of debt sustainability is a necessity in the medium-term fiscal plans. Likewise, international cooperation is significant to driving timely and orderly resolution to the unsustainable debt burdens of these countries. This will enable their contribution to sustainable and inclusive development.
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Nigeria should increase taxes — IMF – Tax increment would ensure debt sustainability and management. – Express your point of view.
We can’t just continue to increase taxes anyhow without accounting for the ones we have been collecting. Collecting taxes on an economy that is filled with inflation will only put more pressure on the people.
Increasing taxes in Nigeria may not be a straightforward solution. The country has a high poverty rate, and many Nigerians may find it difficult to pay higher taxes. Any measures to increase taxes must be accompanied by efforts to improve tax compliance and administration, as well as ensuring that the tax burden does not disproportionately affect vulnerable groups.
Nigeria should increase taxes — IMF. Is like the only language to generate revenue in Nigeria is to increase tax. I wonder why Nigeria government believe so much on increment of tax. They can not even talk about reducing unnecessary expenses, unnecessary allowances.
Increasing tax will only suffer the poor masses
Increase of tax will will increase the revenue of the country but will be hard on people if the tax is increase our economy is yet to stable now increase of tax is not the right time
Increasing taxes could be a complicated solution in Nigeria. Nigeria has a high poverty rate, and many of its citizens may have trouble affording the proposed tax increases.
I know that it will benefit the growth of our country’s economy but I don’t really buy into this idea from IMF because people are struggling already and this will make it worse for us.
I partially agree to this because tax collection in Nigeria is incredibly low compared to other countries; therefore, enhancing tax compliance and expanding tax might be very good.
We are not yet at a point in our economic recovery where a rise in taxes would be beneficial, but it would have a negative impact on the general populace.
In order to prioritise the enhancement of market and economic security, which will ultimately lead to increased growth for our economy, we need to ensure that our fiscal policy is consistent with the policies of the central bank.
With the current country financial crises and indebtedness, it will be better for the Nigerian government to take to the advise of IMF whilst resolving the insecurity, providing basic amenities, good and economic friendly government policies including a standard healthcare and educational systems.
The Nigerian government has pushed the country to the indebted level it is today but with the advise given by the IMF, there is possible that it will help in the long run to resolve the financial instability in the country provided that the government address the insecurity affecting farmers in particularly, work towards improved healthcare and education sector.
The issue of increament proposed by the IMF may be good but the country is facing serious economy problem which has really made business very difficult and also all the increament government has made on tax has not really do us good because the system is very corrupt.