Finance experts have disagreed with the International Monetary Fund’s latest recommendation to the Federal Government to raise its tax rate in order to meet Nigeria’s huge amount spent on debt servicing and developmental projects.
The Federal Government spends an average of N2tn annually servicing its debt obligation to local and foreign creditors.
About $3 trillion is reportedly needed in the next 30 years to address the country’s infrastructure deficit.
But the IMF last Wednesday called for an effective debt management strategy that would ensure that the amount borrowed posed limited risk and the funds deployed for developmental purposes.
The global body said that with Nigeria having one of the lowest tax revenue in the world, it would be challenging to service its debt obligations without broadening the fiscal space.
The nation’s total public debt rose by N3.32 trillion in one year to N25.7 trillion as at the end of June 2019, the Debt Management Office said last Tuesday.
The Federal Government owed N20.42 trillion as of June 30, 2019 while the 36 states and the Federal Capital Territory had a total debt portfolio of N5.28 trillion.
Shedding more light on how the Federal Government could boost revenue, Cathy said the priority was how to increase non-oil tax revenue.
She said this was vital based on the fact that the country’s interest payments as a share of tax were very high.
She added: “On Nigeria, the priority is a comprehensive reform to increase non-oil tax and there are a number of reasons this will contribute to creating space for important spending in infrastructure and human development spending.
“For Nigeria, this is very important for a number of reasons. One, because right now, interests payment as share of tax are very high around a third of overall and two-thirds for the Federal Government.”
Responding, a Professor of Economics at the Olabisi Onabanjo University, Ago Iwoye, Sheriffdeen Tella, said the advice to raise tax had to be analysed to determine whether the IMF was asking Nigeria to increase tax or widen the tax net to accommodate those that are not currently captured.
He said: “If they are advising that we should keep increasing tax, that will not be proper. The economy of Nigeria is currently weak and tax is a function of the income of the people. Increasing tax will be putting too much pressure on income.
“We should rather talk of reschedule the existing loan to enable us to have a longer time to pay or pay less. In addition to this, we need to widen the tax net.”
On his part, the Director General of the Lagos Chamber of Commerce and Industry, Mr Muda Yusuf, pointed out that economic growth through reforms would happen if there was greater commitment to creating an enabling environment for investors.
He said the tax paying segment of the economy had been victim of regulatory and policy shocks in recent years.
”Monetary policy is tight enough in my view. Calling for more tightening will be overkill. Lending rates are high and government borrowing continues to have a crowding out effect on the private sector. We need to push back on portfolio flows as the pillar for stabilising the forex market. I subscribe to the demand for the rationalisation of the multiple forex windows and rates, he said.”
A former President, Association of National Accountants of Nigeria, Dr Sam Nzekwe, noted that many Nigerian businessmen were not paying taxes except workers, whose taxes were being deducted from their salary.
He said: “They should be proactive, go to the people and widen the tax net, they should bring those who are not paying tax into the tax net.”
The Chief Executive Officer, Enterprise Stockbrokers, Mr Rotimi Fakayejo, said the advice given by the IMF to Nigeria was not progressive because it would impair productivity of businesses.

The Minister of State for Petroleum, Mr Timipre Silva, has assured Nigerians that the Federal Government has no immediate plan to remove fuel subsidy.
Silva disclosed this while fielding questions from legislators at a joint session of the National Assembly Committees overseeing the oil sector, yesterday.
He said: “This government is not about to remove subsidy because it is difficult; we believe as a government that our people are going through a lot.
“We cannot as a responsible government hip another issue of petroleum price hike or removal of subsidy on Nigerians.
“It is not on the cards at all, we are just looking at how we can manage it.
Silver said that the official daily consumption rate of petrol in Nigeria does not reflect the actual consumption rate.
He maintained that the government does not believe that Nigerians consume over 60 million litres of fuel daily.
According to him, there is a lot of smuggling and lots of our neighbours are taking advantage of the cheaper price in Nigeria.
He added that Nigeria was subsidising for almost half of Africa which was very difficult to manage.
The minister also said that the government was working to close up such leakages and when achieved, the cost of subsidy would be bearable.

The Federal Government has approved the establishment of oil and gas parks in Akwa Ibom and Bayelsa States.
Minister of State for Petroleum Resources, Timipre Sylva, disclosed this while briefing State House correspondents after the Federal Executive Council (FEC) meeting presided over by President Muhammadu Buhari at the Presidential Villa, last Wednesday.
He said the parks, which would cost over N3 billion, were for the production of oil and gas tools.
“Today, in council, the Ministry of Petroleum Resources presented two memos for the establishment of oil and gas parks.
“ Council approved the oil and gas council, one for Akwa Ibom and the other in Bayelsa.
“The oil and gas parks are to support the development and manufacture of oil and gas tools; as some of you know, in some countries, the service sector of the oil industry is sometimes even bigger than the oil industry itself.
“Unfortunately, in Nigeria, that sector has not grown so much; this administration is really committed to developing the service sector and that is why the oil and gas parks are being built,’’ he said.
Sylva said that the parks would create up to 1000 additional jobs as well as improve the security of the Niger Delta.
On her part, the Minister of State for Transportation, Gbemisola Saraki, said that FEC also approved the purchase and installation of 300 buoys on the River Niger for the inland waterways.
She said that the approval, which was in the tune of N581 million was a repeat procurement because the first one was done in 2017/2018.
Saraki said that the first approval was from Baru to Onitsha while the latest was from Onitsha to Lokoja.
“It is large; this much more; this is 300 bouys; that was 200 bouys; it is to ensure that our waterways are navigable for all the vessels to go through.
“It was important Council appreciated the importance of safety of lives and property.
“It is going to be a six-month contract that will generate approximately between 100 and 120 direct new jobs and various indirect jobs because you know these buoys float.
“They have to actually cast and have concrete base that they sit on top of; so that is the aspect that is going to generate the new direct employment.
“Obviously, it opens up the area; it is part of the programme of the President to have the infrastructure system in Nigeria improved and strengthened because that is how to generate wealth for everybody,’’ she said.