The Federal Government is considering introducing excise duties in the telecoms, lottery, and gambling industries, alongside increasing the Value Added Tax (VAT) rate. Plans to introduce excise duties on telecoms and gambling have been delayed, but the VAT rate increase will come up next year.
The IMF Staff report on Nigeria provided details on this issue and other initiatives by the Federal Government to shore up revenues and reduce the fiscal deficit going forward.
According to the report, the Federal Government targets an increase in the VAT rate from 7.5% to 10% in 2025 and to about 15% by 2026. The proposed increase in VAT rate would be accompanied by input credits to services and assets, a reduction in Corporate Income Tax (CIT), and an increase in excise duties for tobacco and alcohol.
Furthermore, the report noted that the Federal Government hopes to reduce revenue collection by Ministries, Departments, and Agencies (MDAs) and transfer the responsibility to the Federal Inland Revenue Service (FIRS).
The IMF recommended that these fiscal initiatives will be finalised and implementation started alongside the 2025 budget.
Earlier in his administration, President Bola Tinubu set up the committee on fiscal policy and tax reforms with the objective of reforming the nation’s tax laws to optimise revenue collection and increase the tax-to-GDP rate to 18%. Nigeria’s tax-to-GDP rate currently stands at about 10.8%.