The International Monetary (IMF), has advised Nigeria and other Sub-Saharan African countries to focus on eliminating tax exemptions and mobilise domestic revenue to reduce their fiscal deficits.
The Bretton Woods institution said this was a better approach than reducing fiscal expenditure which could be detrimental to economic development. The lender stated this in a paper titled, ‘How to avoid a debt crisis in Sub-Saharan Africa.’
“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," it said.
“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.”
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