In an effort to attract non-oil money into the FG’s coffers, the World Bank has requested that the federal government raise the VAT rate.
In its bi-annual Nigeria Development Update, “Turning the Corner: From reform and renewed hopes, to results,” released today, the Bretton Woods organization made this claim.
The bank suggested raising the existing 7.5% VAT rate in the study in an effort to free up more budgetary flexibility and boost non-oil revenue.
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The bank did point out that while gasoline exemptions should be eliminated, such a hike should permit input tax credits, as several of the recommendations made to boost non-oil revenues
It states,“Increase VAT rate while allowing for input tax credit; remove exemptions for petrol products”
Other recommendations from the bank geared towards increasing non-oil revenue include; the use of data towards tax auditing and the introduction of simple turnover tax for SMEs at the state level rather than the multiple levies and fees.
The report also noted that the reforms of President Bola Tinubu if sustained can help reduce inflation to 19.6% in 2025. Nigeria’s current inflation rate stands at 27.33% for October 2023.
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President Tinubu is targeting an inflation rate of 21.4% for 2024 according to his budget presentation speech.
President Tinubu has carried out two massive reforms since his inauguration in May- the unification of the foreign exchange market and the removal of the costly subsidy on petrol.
The bank further highlighted other benefits of the reforms if sustained in the long run to include an increase in GDP growth to 3.7% in 2025, a reduction in fiscal deficit ratio to GDP from its current 5.1% to 3.7% in 2025, and a reduction in the public debt service as a percentage of revenue from 102% in 2022 to 51% by 2025.
