The Federal Government is undertaking significant tax reforms to increase revenue and improve efficiency. This initiative is driven by the need to meet the conditions for a $750 million loan from the World Bank, part of a larger $2.25 billion package approved to bolster Nigeria’s economy and support vulnerable populations.
According to THE PUNCH, to secure the loan, the government must implement the Accelerating Resource Mobilisation Reforms (ARMOR) programme, which focuses on three key areas:
- Tax and Excise Reforms: Increasing Value-Added Tax (VAT) collections and raising excise rates on health and environmentally friendly products.
- Strengthening Tax and Customs Administrations: Enhancing VAT compliance and audit effectiveness, as well as safeguarding oil and gas revenues through increased transparency and net revenue contributions.
- Customs Reforms: Improving trade compliance and increasing revenue through measures like directing cargo through the Green Channel and implementing a compliant trader programme.
The government plans to increase the VAT rate from 7.5% to 10% by 2025 and further to 12.5% by 2026. Additionally, it intends to reintroduce excises on telecom services and electronic money transfers.
The Federal Government is also considering a new tax bill that would introduce excise duties on services like telecoms, gaming, gambling, lotteries, and betting.
The World Bank loan agreement outlines specific disbursement-linked indicators, including increasing VAT collections, registering VAT filers, implementing an e-invoicing system, and reducing tax expenditures.
The FIRS and NCS will receive $5 million each to enhance their operations and revenue collection capabilities. This funding will be used to develop new systems, improve data sharing, conduct risk-based audits, and strengthen compliance processes.
The government is also exploring alternative tax incentives, such as the Economic Development Incentive Certificate, to encourage investment and economic growth.
Overall, these tax reforms and the World Bank loan are aimed at boosting Nigeria’s revenue generation, improving tax administration, and fostering a more conducive business environment.