The World Bank has advised Nigeria to consider increasing excise duties on alcohol and tobacco to increase revenues.
The body said this was imperative as there was a potential N600bn to be generated annually.
A senior tax specialist at the World Bank, Rajul Awashti said this during a virtual summit on domestic revenue mobilisation on Thursday.
He said the recommendation was in line with its Nigeria Development Update (NDU) report which says excise duties can boost tax revenue by up to one per cent of gross domestic product (GDP).
According to the NDU reports, on alcohol and tobacco, Nigeria applies an ad valorem rate of 20 percent, which is less than half the median of its African peers and that to effectively tap into this revenue source, Nigeria could retain the current ad valorem excises but augment them with specific ones.
“World Bank estimates show that retaining the current rates and gradually increasing the specific duty component to achieve tax incidence consistent with regional peers will generate additional revenue of N955 billion in the first year,” a part of the report read.
Awasthi said at the summit that Nigeria has one of the lowest excise duty rates on tobacco and alcohol in the whole of Africa, and the duty rate on cigarettes is lower than the standard set by the Economic Community of West African States (ECOWAS).
He said if Nigeria adopts the same excise duty rate as Kenya, the country can raise a significant amount of revenue and if it adopts the ECOWAS standard, that will also raise the revenue significantly.
“Excises on tobacco and alcohol do not impact the vast majority of people and compliance can be monitored much more easily by the compliance agencies. If the measures outlined in our report are implemented, these excise duties on tobacco and alcohol can raise more than N600bn a year.”
The World Bank further advised the federal government to embrace tax policies that do not endanger investments, jobs or the growth of the economy.
