ABUJA May 22 – Nigeria will increase the interest rate on unpaid taxes to discourage companies and individuals from paying late and racking up a larger debt, the finance ministry said on Monday.
The ministry said the measure will take effect on July 1 and that the rate would be five percent over a central bank rate known as the Minimum Rediscount Rate, a benchmark lending rate.
“The review of the interest rates on unpaid taxes was one of the necessary measures adopted by the Federal Government to enhance tax compliance, minimize tax evasion and deter late payments,” the finance ministry said in a statement.
Economists have long criticised the low levels of tax in Africa’s largest economy and in March the Abuja government laid out plans to increase its overall tax to GDP ratio to 15 percent by 2020 from 6 percent now.
Among plans, the OPEC member seeks to improve tax collection, targeting an annual tax revenue of 350 billion naira ($1.15 billion) a year and proposes hiking a luxury goods tax to 15 percent from 5 percent.