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.
In the second quarter of 2023, companies in Nigeria paid the government roughly N1.53 trillion in taxes, according to the National Bureau of Statistics’ most recent data on company income tax. The Federal Inland Revenue Service describes CIT as a 30% tax levied on business profits.
This is the first time businesses have paid more than N1 trillion in a single quarter. 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 greatest 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. Local payments were N512.03 billion, while foreign VAT payments were N142.63 billion and import VAT made a contribution of N126.69bn in Q2 2023.”
The greatest 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%).
Nigeria has one of the lowest revenue-to-GDP ratios worldwide, according to the International Monetary Fund, rendering it susceptible to fiscal shocks. 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 the Chairman of the Presidential Tax Reform Committee, Mr. Taiwo Oyedele, is roughly N6 trillion.