Tax income from businesses and consumers increased by 96.11 percent to N2.31 trillion in the second quarter of 2023, representing a significant increase from the first quarter to the second quarter of the year.
According to the National Bureau of Statistics, businesses and consumers collectively paid N1.18 trillion in taxes in Q1 2023. The large increase in taxes collected in Q2 was mostly due to Company Income Tax, which increased by 226.40% quarterly to N1.53 trillion from N469.01 billion in Q1, 2023.
According to the National Bureau of Statistics' most recent data on company income tax, companies in Nigeria paid the government around N1.53 trillion in taxes during the second quarter of 2023. The Federal Inland Revenue Service reports that CIT is a 30 per cent tax imposed on the profits of companies.
This is the first time businesses have paid more than N1 trillion in a single quarter, according to checks by The PUNCH. According to information from the NBS, Q2 2023 revenue was larger than the annual totals for 2015 ($1.38 trillion), 2016, ($1.02 trillion), 2017, ($1.25 trillion), and 2018, ($1.41 trillion).
The highest sum previously collected was N810.19 billion in Q3 2023, and the lowest amount was N155.96 billion in Q1 2017.
VAT, a consumption tax of 7.5% that is paid by a product's final consumer, climbed marginally by 10.11% quarter-over-quarter to N781.35 billion in Q2 from N709.59 billion in Q1.
The NBS provided a statement regarding taxes, stating that "On the aggregate, CIT for Q2 2023 was recorded at N1.53tn, representing a growth rate of 226.40% on a quarter-over-quarter basis from N469.01bn in Q1 2023. In Q2 2023, local payments totaled N1.02 trillion, while foreign CIT payments contributed N505.91 billion.
On the whole, VAT for Q2 2023 was reported at N781.35 billion, representing a growth rate of 10.11% on a quarterly basis from N709.59 billion in Q1 2023, according to the document. In Q2 2023, local payments were N512.03 billion, foreign VAT payments were N142.63 billion, and import VAT contributed N126.69 billion.
The highest CIT growth was seen in the water supply, sewerage, waste management, and cleanup activities (626.52%) and lodging and food service activities (585.11%). The three industries that contributed the most to CIT were manufacturing (25.63%), finance and insurance (24.47%), and information and communication (20.30%).
The greatest significant increases in VAT were seen in the activities of extraterritorial organizations and bodies (212.06%) and real estate activities (123.09%). The three main sources of VAT were manufacturing (29.64%), information and communication (21.19%), and financial and insurance industries (11.18%).
Professor Akpan Ekpo, an economist from the University of Uyo, recently told The PUNCH that the increase in VAT collections was caused by an increase in the VAT rate and that the expansion of CIT was a result of the FIRS's efforts.
"Increase in VAT is due to the recently raised VAT rate," he stated. Compared to when it was five percent, this increase of 2.5% to 7% will result in a steady increase in VAT collected.
Nigeria is susceptible to fiscal shocks since it has one of the lowest revenue-to-GDP ratios worldwide, according to the International Monetary Fund. Since then, it has requested that the Federal Government raise the VAT rates to 15%.
The Federal Government has announced plans to evaluate and scale back tax exemptions granted to businesses operating in Nigeria in an effort to further boost tax revenues. The overall annual tax incentive provided to businesses in Nigeria, according to Mr. Taiwo Oyedele, Chairman of the Presidential Tax Reform Committee, is roughly N6 trillion.
When you don't examine your incentive system, it can reach a point where it distorts economic growth because certain people benefit and others don't, but they operate in the same sector, making it impossible for them to compete. You must also consider the benefits and costs from this perspective.
"As a nation, we must be able to persuade ourselves that the advantage we are receiving is greater than N1 if we are giving away N1. Otherwise, that no longer serves as a motivator for the economy, only for some people.
He added that there is a N20 trillion tax deficit in the nation, which may be plugged by automated procedures to increase tax collection.
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