International Monetary Fund (IMF) has recommended that Nigeria and other Sub-Saharan African nations prioritize the removal of tax exemptions and enhance domestic revenue generation to mitigate their fiscal deficits.
In their publication titled ‘Avoiding a Debt Crisis in Sub-Saharan Africa,’ the international body contended that opting for this strategy, instead of reducing fiscal spending, could safeguard economic growth.
The statement reads in part,
“Sub-Saharan African countries tend to rely excessively on expenditure cuts to reduce their fiscal deficits. Although this may be warranted in some circumstances, revenue measures, like eliminating tax exemptions or digitalising filing and payment systems, should play a greater role.
“Mobilising domestic revenue is less detrimental to growth in countries where initial tax levels are low, whereas the cost associated with reducing expenditures is particularly high given Africa’s large development needs. While difficult to achieve, large and rapid increases in revenue have been observed in some countries like The Gambia, Rwanda, Senegal, and Uganda, which relied on a mix of revenue administration and tax policy measures.”
