## Stochastic ## Source details **Canonical URL:** [Stochastic](https://www.imf.org/-/media/files/publications/selected-issues-papers/2025/english/sipea2025040.pdf) ## Other formats - [Markdown version](/-/media/files/publications/selected-issues-papers/2025/english/sipea2025040.pdf.md) - [Structured JSON version](/-/media/files/publications/selected-issues-papers/2025/english/sipea2025040.pdf.json) --- ### Executive summary and context - Niger’s tax revenue as a percentage of GDP is one of the lowest in the WEAMU region and has been deteriorating: tax revenues reached 9.4 percent of GDP in 2022. - Total fiscal revenues have fluctuated between about 15 and 19 percent of GDP over the last decade. - Key disruptions affecting revenues Sep 2019–Sep 2024: the military takeover in July 2023 and subsequent sanctions, delays in crude oil exports, security issues, and border closure with Benin. - Taxes account for about 60 percent of total fiscal revenues. ### Main findings: tax potential, gaps, and effort - Stochastic frontier results: - Estimated tax potential: nearly 12.8 percent of GDP. - Estimated tax gap in 2022: 3.4 percent of GDP. - Estimated uncollected revenue in 2022: CFAF 323 billion. - Tax effort: - Average tax effort over 2010-2022: 80.7 percent (implying 19.3 percent of potential tax revenue not collected). - Tax gap composition and trends: - The tax gap has been rising since 2015 after a decline from 4.2 percent of GDP in 2000 to 1.4 percent in 2015. - Goods and services (sales and production) tax gap: 1.5 percent of GDP (component of total 2022 gap). - International trade tax gap: 1.5 percent of GDP (one of the largest among low-income countries and the highest among WAEMU countries). - Between 2015 and 2022: - Goods and services tax gap ranged between 0.5 and 1.5 percent of GDP. - International trade tax gap fluctuated between 1.1 and 1.5 percent of GDP. ### Drivers of low revenue mobilization - Sector and tax composition: - Revenues from personal income tax (PIT), corporate income tax (CIT), property tax, and goods and services are particularly low by regional standards. - Property tax and PIT revenues-to-GDP ratios are below 1 percent. - Contribution of CIT has been declining since 2013. - Revenues from international trade declined from 3.4 in 2013 to 2.8 percent of GDP in 2019. - Informality: - Informal sector estimated to account for about 58 percent of GDP (authorities’ estimate). - Estimated 98.5 percent of total employment is informal. - Cross-country evidence: countries with below-median labor informality have a 7-percentage point higher tax effort; goods and services tax effort is 11 percentage points higher with low informality. - Institutions and digitalization: - Higher-quality institutions and greater public-sector digitalization correlate with higher tax effort. - Countries with digitalization above the median achieve, on average, a tax effort 3 percentage points higher than those below the median. - Administration and tax expenditures: - Ample tax administration inefficiencies and a high level of tax expenditures undermine revenue collection. ### Consumption taxation (VAT) and C-efficiency - VAT context: - Standard VAT rate in Niger: 19 percent. - Peak VAT revenue: 7 percent of GDP in 2016; 3.5 percent of GDP in 2019. - VAT C-efficiency in Niger: about 22 percent; regional average: 34 percent. - Policy-relevant quantified impacts: - Increasing reduced VAT rate from 5 percent to 10 percent on all products listed in Article 226 of the General Tax Code could boost tax revenues by 0.09 percent of GDP. - Eliminating VAT exemptions on petroleum products; kerosene; flour; prepared for children's food for retail sale; pure sodium salt and chloride; other breathing apparatus and gas masks; some medical and veterinary equipment and furniture could increase revenues by at least 0.61 percent of GDP (estimates do not include agriculture, livestock, and fishing exemptions). - Equity considerations: - VAT exemptions and reduced rates are untargeted and yield high revenue loss relative to benefits accruing to low-income individuals; mitigating measures should protect vulnerable groups. ### Excises and other indirect taxes - Excise tax revenue: about 0.5 percent of GDP (much lower than other WAEMU countries and LIDCs). - Potential measures and findings: - Expanding the excise base on passenger vehicles and increasing excise rates could provide important near-term revenue; current excise rate on passenger vehicles: 8 percent, but majority of vehicles are exempt. - Fully applying prescribed excise rates in the CGI for 2021 would have generated a revenue increase of 0.05 percent of GDP. - Consider combining ad valorem excise elements with specific per-unit components to mitigate underreporting incentives. ### Income and wealth taxation (PIT and CIT) - PIT and CIT revenue collection remains below 1 percent of GDP. - Explanatory factors: narrow tax base, low worker incomes (many below the poverty line), limited formal business sector, large informal sector. - Statutory PIT top rate: 35 percent in 2022 (close to averages in other LIDCs and EMDEs). - Evidence suggests increasing statutory rates or adjusting exempt income may have limited effects in low-income countries; addressing informality and improving tax administration likely more effective. - Rationalizing tax benefits and exemptions could help boost CIT revenues. ### Property tax revenue: current status and reform potential - Property tax revenue is about 0.1 percent of GDP, lower than in peers like Burkina Faso or Togo. - Reforms to accelerate property and land registration could improve revenue mobilization: - Create a cadaster and improve the estimation of property values. - Deploy new property identification technologies—such as modern mapping technology and aerial photography by drones—and simplified valuation methods to improve property registry. - With such reforms and technology, recurrent property tax revenues in developing countries could be at least 10 times higher than current levels (IMF 2024a). - Once administrative infrastructures are in place, property taxes could be an important element of equitable and efficient revenue mobilization. ### Taxing natural resources - Natural resource revenue, including crude and refined oil as well as uranium, has fluctuated over the last decade, peaking at 4.3 percent of GDP in 2013. - The relative contribution of uranium has declined significantly since 2012, while oil has become the main source of resource revenues. - Total resource revenues are projected to continue increasing up to 5 percent of GDP in 2025 when oil production and exports peak. - Royalties have been the main source of uranium-related revenues; royalty rates were automatically adjusted to the profitability of the mines, which: - makes them lose their feature as payment for access to a scarce resource, and - facilitates tax avoidance. - Mining companies have been subject to corporate taxes but were also eligible for tax benefits including exemptions on duties and customs taxes. - Technical assistance could help optimize mining taxation going forward. ### Enhancing revenue administration - Performance and weaknesses: - The 2021 TADAT report shows that Niger performed poorly across all nine key areas analyzed—including accountability and transparency, efficient revenue management, timely tax filing, risk management—and that little has improved since 2017. - One exception: progress on the integration of the IT systems of Directorate General of Taxes (DGI) and Directorate General of Customs (DGD), which can contribute to enhancing automation of processes and improve monitoring and compliance. - Key areas for improvement: - Improve the quality of taxpayer registry—maintain a clean, accurate, and complete database. - Promote tax compliance by providing taxpayers with necessary information and support, and by reducing taxpayers’ compliance costs. - Establish a structured, documented procedure for identifying, assessing, and mitigating institutional and operational risks, including risks of loss of confidential data. - Institutional strengthening and human capital: - Research shows that an increase in the strength of tax administration from the 40th to the 60th percentile is associated with an average increase in tax revenue by 1.8 pp. of GDP (Adan et al., 2023). - Niger lags other Low Income and Developing Economies (LIDCs) on the size and qualifications of the tax administration unit. - Ensuring sufficient funding to hire and retain adequate human capital for revenue administrations is essential. - Digitalization and automation: - Revenue administrations in Niger continue to have lower levels of digitalization and automation of core operations than peers. - The most recent data available for Niger shows that electronic tax filing and pre-filling of taxes have not been initiated in the country. - In other LIDCs for which data is available, about 40 percent of all CIT, PIT, and VAT tax returns are filled electronically. - VAT e-invoicing was introduced in 2021. ### Political economy of taxation - Social risks and reform resistance: - Fear of social unrest could block structural reforms and weaken revenue mobilization efforts. - Recent regional examples of resistance: Kenya (2024 Finance Act demonstrations), Ghana (trade union pushback on electricity VAT proposals), Senegal (pressures against fuel subsidy reform). - Mass mobilization events in Africa are more often driven by objections to political behavior; data does not show clear evidence that revenue mobilization is a key driver of social unrest. - Drivers of social unrest in sub-Saharan Africa include structural factors like poverty, low inclusion, corruption perceptions, weak governance, and security risks; macroeconomic conditions and previous unrest events also increase likelihood of unrest events. - Measures to improve social acceptability: - A well-thought communication strategy, open dialogue on the need for revenue mobilization, consulting key stakeholders, and correcting misinformation about policies. - Protecting the most vulnerable households to contain poverty. - Improving governance to show commitment and reassurance on the use of taxpayers’ money. - Transparency and accountability: - Fiscal governance has been poor in Niger with lack of transparency and accountability in revenue administration; weak fiscal transparency and limited access to budget documents; poor oversight of public agencies; limited transparency in public procurement contracts; and pervasive corruption. - Reverting the dissolution of the Cour des Comptes, and continuing the timely publication of budget execution reports, would help improve transparency in the use of fiscal revenues and raise support for further revenue mobilization. ### Policy recommendations and reform options - Short- to medium-term revenue mobilization priorities: - Rationalize VAT exemptions and reduced VAT rates (e.g., consider increasing reduced rate from 5 percent to 10 percent on specified products such as edible oil and sugar). - Revisit VAT exemptions on agricultural, livestock, fishing activities, and petroleum products. - Reform excise taxes (expand base, raise rates on passenger vehicles, improve design to limit underreporting). - Reform property taxation and other low-performing tax heads. - Strengthen tax administration capacity and integrate tax and customs IT platforms to allow real-time information exchange and automate tasks. - Medium- to long-term institutional and structural reforms: - Tackle informality to expand the tax base (informal sector accounts for about 58 percent of GDP). - Improve governance and public-sector transparency and accountability to raise tax effort. - Promote digitalization of the public sector to improve compliance and collection. - Ongoing/planned measures: - Revision and simplification of the General Tax Code scheduled for adoption in April 2025, intended to redistribute the tax burden from factors of production to consumption. - Integration of tax and customs IT platforms underway to boost compliance and automation. ### Conclusions and policy implications - There is strong potential to boost tax revenue in Niger, but further efforts are needed. - Tackling tax expenditures and improving tax administration would contribute significantly to closing the existing tax revenue gap in the country. - Successful episodes of improved revenue mobilization share common characteristics: - Implement a broad range of tax policy and revenue administrative reforms. - Embark on a comprehensive and multiyear reform strategy, including focusing on the quality of institutions, broadening the tax base, and modernizing tax administrations. - Demonstrate strong and sustained political commitment. - Build consensus for reform. *Source: sipea2025040 - Selected Issues Paper chapter on taxation (IMF).* ### 1. Stochastic ### 1. Stochastic ### Executive summary and context - Niger’s tax revenue as a percentage of GDP is one of the lowest in the WEAMU region and has been deteriorating: tax revenues reached 9.4 percent of GDP in 2022. - Total fiscal revenues have fluctuated between about 15 and 19 percent of GDP over the last decade. - The military takeover in July 2023 and subsequent sanctions, delays in crude oil exports, security issues, and border closure with Benin contributed to sharp declines and underperformance in revenues from Sep 2019-Sep 2024. - Taxes account for about 60 percent of total fiscal revenues. ### Main findings: tax potential, gaps, and effort - Stochastic frontier results: - Estimated tax potential: nearly 12.8 percent of GDP. - Estimated tax gap in 2022: 3.4 percent of GDP. - Estimated uncollected revenue in 2022: CFAF 323 billion. - Tax effort: - Average tax effort over 2010-2022: 80.7 percent (implying 19.3 percent of potential tax revenue not collected). - Tax gap composition and trends: - The tax gap has been rising since 2015 after a decline from 4.2 percent of GDP in 2000 to 1.4 percent in 2015. - The goods and services (sales and production) tax gap: 1.5 percent of GDP (component of total 2022 gap). - The international trade tax gap: 1.5 percent of GDP (one of the largest among low-income countries and the highest among WAEMU countries). - Between 2015 and 2022: - Goods and services tax gap ranged between 0.5 and 1.5 percent of GDP. - International trade tax gap fluctuated between 1.1 and 1.5 percent of GDP. ### Drivers of low revenue mobilization - Sector and tax composition: - Revenues from personal income tax (PIT), corporate income tax (CIT), property tax, and goods and services are particularly low by regional standards. - Property tax and PIT revenues-to-GDP ratios are below 1 percent. - Contribution of CIT has been declining since 2013. - Revenues from international trade declined from 3.4 in 2013 to 2.8 percent of GDP in 2019. - Informality: - Informal sector estimated to account for about 58 percent of GDP (authorities’ estimate). - Estimated 98.5 percent of total employment is informal. - Cross-country evidence: countries with below-median labor informality have a 7-percentage point higher tax effort; goods and services tax effort is 11 percentage points higher with low informality. - Institutions and digitalization: - Higher-quality institutions and greater public-sector digitalization correlate with higher tax effort. - Countries with digitalization above the median achieve, on average, a tax effort 3 percentage points higher than those below the median. - Administration and tax expenditures: - Ample tax administration inefficiencies and a high level of tax expenditures undermine revenue collection. ### Consumption taxation (VAT) and C-efficiency - VAT context: - Standard VAT rate in Niger: 19 percent. - Peak VAT revenue: 7 percent of GDP in 2016; 3.5 percent of GDP in 2019. - VAT C-efficiency in Niger: about 22 percent; regional average: 34 percent. - Policy-relevant quantified impacts: - Increasing reduced VAT rate from 5 percent to 10 percent on all products listed in Article 226 of the General Tax Code could boost tax revenues by 0.09 percent of GDP. - Eliminating VAT exemptions on petroleum products; kerosene; flour; prepared for children's food for retail sale; pure sodium salt and chloride; other breathing apparatus and gas masks; some medical and veterinary equipment and furniture could increase revenues by at least 0.61 percent of GDP (estimates do not include agriculture, livestock, and fishing exemptions). - Equity considerations: - VAT exemptions and reduced rates are untargeted and yield high revenue loss relative to benefits accruing to low-income individuals; mitigating measures should protect vulnerable groups. ### Excises and other indirect taxes - Excise tax revenue: about 0.5 percent of GDP (much lower than other WAEMU countries and LIDCs). - Potential measures and findings: - Expanding the excise base on passenger vehicles and increasing excise rates could provide important near-term revenue; current excise rate on passenger vehicles: 8 percent, but majority of vehicles are exempt. - Fully applying prescribed excise rates in the CGI for 2021 would have generated a revenue increase of 0.05 percent of GDP. - Consider combining ad valorem excise elements with specific per-unit components to mitigate underreporting incentives. ### Income and wealth taxation (PIT and CIT) - PIT and CIT revenue collection remains below 1 percent of GDP. - Explanatory factors: narrow tax base, low worker incomes (many below the poverty line), limited formal business sector, large informal sector. - Statutory PIT top rate: 35 percent in 2022 (close to averages in other LIDCs and EMDEs). - Evidence suggests increasing statutory rates or adjusting exempt income may have limited effects in low-income countries; addressing informality and improving tax administration likely more effective. - Rationalizing tax benefits and exemptions could help boost CIT revenues. ### Policy recommendations and reform options - Short- to medium-term revenue mobilization priorities: - Rationalize VAT exemptions and reduced VAT rates (e.g., consider increasing reduced rate from 5 percent to 10 percent on specified products such as edible oil and sugar). - Revisit VAT exemptions on agricultural, livestock, fishing activities, and petroleum products. - Reform excise taxes (expand base, raise rates on passenger vehicles, improve design to limit underreporting). - Reform property taxation and other low-performing tax heads. - Strengthen tax administration capacity and integrate tax and customs IT platforms to allow real-time information exchange and automate tasks. - Medium- to long-term institutional and structural reforms: - Tackle informality to expand the tax base (informal sector accounts for about 58 percent of GDP). - Improve governance and public-sector transparency and accountability to raise tax effort. - Promote digitalization of the public sector to improve compliance and collection. - Ongoing/planned measures: - Revision and simplification of the General Tax Code scheduled for adoption in April 2025, intended to redistribute the tax burden from factors of production to consumption. - Integration of tax and customs IT platforms underway to boost compliance and automation. *Source: IMF staff SIP "TAX POTENTIAL AND REVENUE MOBILIZATION IN NIGER", December 17, 2024.* ### 19. Property tax revenue has been stagnant and minimal over the past decade. Property ### 19. Property tax revenue has been stagnant and minimal over the past decade. Property ### Property tax revenue: current status and reform potential - Property tax revenue is about 0.1 percent of GDP, lower than in peers like Burkina Faso or Togo. - Reforms to accelerate property and land registration could improve revenue mobilization: - Create a cadaster and improve the estimation of property values. - Deploy new property identification technologies—such as modern mapping technology and aerial photography by drones—and simplified valuation methods to improve property registry. - With such reforms and technology, recurrent property tax revenues in developing countries could be at least 10 times higher than current levels (IMF 2024a). - Once administrative infrastructures are in place, property taxes could be an important element of equitable and efficient revenue mobilization. ### Taxing Natural Resources - Natural resource revenue, including crude and refined oil as well as uranium, has fluctuated over the last decade, peaking at 4.3 percent of GDP in 2013. - The relative contribution of uranium has declined significantly since 2012, while oil has become the main source of resource revenues. - Total resource revenues are projected to continue increasing up to 5 percent of GDP in 2025 when oil production and exports peak. - Royalties have been the main source of uranium-related revenues; royalty rates were automatically adjusted to the profitability of the mines, which: - makes them lose their feature as payment for access to a scarce resource, and - facilitates tax avoidance. - Mining companies have been subject to corporate taxes but were also eligible for tax benefits including exemptions on duties and customs taxes. - Technical assistance could help optimize mining taxation going forward. ### Enhancing Revenue Administration - Niger’s revenue administration remains relatively weak despite recent progress. - The 2021 TADAT report shows that Niger performed poorly across all nine key areas analyzed—including accountability and transparency, efficient revenue management, timely tax filing, risk management—and that little has improved since 2017. - One exception: progress on the integration of the IT systems of Directorate General of Taxes (DGI) and Directorate General of Customs (DGD), which can contribute to enhancing automation of processes and improve monitoring and compliance. - Key areas for improvement identified: - Improve the quality of taxpayer registry—maintain a clean, accurate, and complete database. - Promote tax compliance by providing taxpayers with necessary information and support, and by reducing taxpayers’ compliance costs. - Establish a structured, documented procedure for identifying, assessing, and mitigating institutional and operational risks, including risks of loss of confidential data. - Institutional strengthening and modernization are vital: - Research shows that an increase in the strength of tax administration from the 40th to the 60th percentile is associated with an average increase in tax revenue by 1.8 pp. of GDP (Adan et al., 2023). - Human capital and resourcing: - Ensuring sufficient funding to hire and retain adequate human capital for revenue administrations is essential. - Niger lags other Low Income and Developing Economies (LIDCs) on the size and qualifications of the tax administration unit. - Digitalization and automation: - Revenue administrations in Niger continue to have lower levels of digitalization and automation of core operations than peers. - The most recent data available for Niger shows that electronic tax filing and pre-filling of taxes have not been initiated in the country. - In other LIDCs for which data is available, about 40 percent of all CIT, PIT, and VAT tax returns are filled electronically. - VAT e-invoicing was introduced in 2021, an important step to automate and modernize core operations and contribute to VAT collection. ### Political economy of taxation - Fear of social unrest could block structural reforms and weaken revenue mobilization efforts. - Resistance against tax hikes has recently taken place in a few African countries, such as Kenya, Ghana, and Senegal. - Recently, in Kenya, tax changes under the 2024 Finance Act led to demonstrations in the country. The Finance Act was amended to remove some of the tax hikes initially proposed by the government. - Resistance to reforms has also emerged in Ghana, with trade unions pushing back on electricity VAT proposals, and in Senegal, with pressures against fuel subsidy reform. - Mass mobilization events have become more frequent in Africa, primarily driven by objections to political behavior; data does not show clear evidence that revenue mobilization is a key driver of social unrest. - Key drivers of social unrest in sub-Saharan Africa include structural factors like poverty, low inclusion, corruption perceptions, weak governance, and security risks; macroeconomic conditions and previous unrest events also increase likelihood of unrest events. - Improving social acceptability requires: - A well-thought communication strategy, open dialogue on the need for revenue mobilization, consulting key stakeholders, and correcting misinformation about policies. - Protecting the most vulnerable households to contain poverty. - Improving governance to show commitment and reassurance on the use of taxpayers’ money. - Improving transparency and accountability of institutions is essential to gain support for revenue mobilization: - Fiscal governance has been poor in Niger with lack of transparency and accountability in revenue administration; weak fiscal transparency and limited access to budget documents; poor oversight of public agencies; limited transparency in public procurement contracts; and pervasive corruption. - Reverting the dissolution of the Cour des Comptes, and continuing the timely publication of budget execution reports, would help improve transparency in the use of fiscal revenues and raise support for further revenue mobilization. ### Conclusions and policy implications - There is strong potential to boost tax revenue in Niger, but further efforts are needed. - Tackling tax expenditures and improving tax administration would contribute significantly to closing the existing tax revenue gap in the country. - Successful episodes of improved revenue mobilization share common characteristics (IMF 2022b): - Implement a broad range of tax policy and revenue administrative reforms. - Embark on a comprehensive and multiyear reform strategy, including focusing on the quality of institutions, broadening the tax base, and modernizing tax administrations. - Demonstrate strong and sustained political commitment. - Build consensus for reform. *Source: sipea2025040 - Selected Issues Paper chapter on taxation (IMF).* --- _Source: https://www.imf.org/-/media/files/publications/selected-issues-papers/2025/english/sipea2025040.pdf_