The country’s product taxes increased to N1.36 trillion in the first half of 2023 despite widespread suffering getting worse.
This is a 113.29 percent increase from N636.19 billion in the first six months of 2021 and a 25.00 percent increase from N1.09 trillion in the same period of 2022.
These figures are based on current basic prices and were collected from National Bureau of Statistics data on Net Indirect Taxes on Products.
Adjusted for inflation, product taxes amounted to N465.94bn in the first six months of 2023, a 34.98% increase from N345.19bn in the first six months of 2021 and an 11.94% increase from N416.23bn in the similar period of 2022.
The World Bank defines net indirect taxes (taxes less product subsidies) as the total of product taxes less subsidies. It claimed that product taxes are taxes levied on producers for the manufacture, sale, purchase, or use of goods and services.
In the second quarter of 2023, the country’s GDP increased by 2.51% year on year in real terms. This was lower than the 3.54 percent recorded in Q2 2022, and the NBS stated that this could be due to the severe economic conditions.
With revenue being impacted by the worldwide economic slump, the federal government has increased its tax initiatives. They announced how it would increase revenues in its Medium Term Expenditure Framework and Fiscal Strategy Paper for 2023-2035.
“These measures include improving the tax administration framework, including tax filing and payment; as well as the introduction of new and/or increased excise on sugar-sweetened beverages, tobacco, and alcohol.” The introduction has elicited a range of reactions.”
The year-on-year increase in goods taxes comes despite the country’s declining purchasing power, with inflation reaching 22.79 percent in June. According to the World Bank, excessive inflation has increased poverty and will force almost four million Nigerians into poverty between January and May 2023.
Inflation is forecast to continue rising and reach 25% by 2023. According to the World Bank, “headline inflation is expected to rise from 18.8 percent in 2022 to 25% in 2023.”
Meanwhile, the International Monetary Fund has advised Nigeria to raise its VAT rate to 15% by 2027, which could increase the amount received from product tax and raise the prices of goods and services.
