economy
FG considering excise duties on telecoms, lottery, gambling
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.
The report stated, “Excises on telecommunications, lotteries, and gambling are under consideration but have been delayed. The authorities’ planned reforms in 2025 include raising the VAT rate—while introducing input credits for services and assets—increased excises on tobacco and alcohol, and rationalization of tax incentives accompanied by a reduction of the corporate income tax (CIT) rate to enhance competitiveness.”
FIRS to collect revenues for MDAs
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.
What you should know
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%.
- Proposals to increase the VAT rate have been in the offing in recent years but the Federal Government has not muscled the political will to do so considering public perception. An increase in the VAT rate would exacerbate the inflation rate across the country which reached 33.2% in March.
- Also, an introduction of excise duties on the telecoms industry could have ripple effects on cost of telecoms services which haven’t seen an increase for a long time now. Already, operators in that space have been calling for an increase in tariffs considering the situation in the foreign exchange market and current inflation rates.
- The federal government is currently pursuing diverse means to reduce the fiscal deficit which according to the 2024 budget is expected to reach 18 trillion.
