The International Monetary Fund(IMF), in a report, haa advised Nigeria and other developing countries to take advantage of the revenue potential of personal income tax.
The report which was titled ‘Personal Income Tax Has Untapped Potential in Poorer Countries’ stated that any government aiming to achieve lasting economic recovery from the pandemic must focus on maximizing their revenue source, and personal income tax.
The Washington-based lender added that in the two decades preceding the pandemic, income tax revenue more than doubled in low-income countries, rising from the equivalent of 1 per cent of GDP to 2.1 per cent, while emerging markets saw an increase from 2.1 per cent to 3.1 per cent.
It further added that in emerging market economies, this shift has sometimes actually reduced revenue. This is the case in part because many emerging markets have introduced flat tax systems with low rates and those with progressive schedules have reduced rates over the last two decades.
According to the IMF, in most low-income countries, personal income tax is still in its infancy, and revenue from this source averages only 2.5 per cent of GDP in these countries, which is partially a result of narrow tax bases.
