The Federal Government’s tax revenue from local companies in Nigeria declined by 36.4 percent within three months, according to the National Bureau of Statistics (NBS).
BusinessDay analysis from the NBS’s latest Company Income Tax (CIT) report shows that tax revenue reduced to N651.6 billion in the third quarter of 2023 from N1.02 trillion in the previous quarter.
But on a year-on-year basis, it rose by 34.9 percent from N483.2 billion in Q3 last year.
“Companies that are producing, are reducing their capacity because they are selling less, causing them to reduce their personnel,” Sola Obadimu, director-general of Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture, said.
He said low production means less tax revenue for the government who are trying to raise taxes. “So, the coping measures are not good.”
A breakdown of the NBS report showed that payments from foreign companies rose by 116.9 percent to N1.10 trillion in Q3, the highest since 2015 from N505.9 in Q2. On a year-on-year basis, it also grew by 235.6 percent from N327 billion.
CIT which is also known as corporate tax is a levy the government imposes on the income of a company.
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The rate is hinged on zero percent for companies with gross turnover of N25 million or less, 20 percent for companies with gross turnover greater than N25 million and less than N100 million, and 30 percent for large companies above N100 million.
“The yield for non-oil tax revenue has continued to grow due to the efficiency from technology deployed by Federal Inland Revenue Service,” Yomi Olugbenro, partner and West Africa Tax Leader at Deloitte, said.
He added that the impact of foreign exchange unification has also continued to have a positive impact on the overall tax revenue of the government.
The Central Bank of Nigeria in June merged all segments of the foreign exchange market into the Investors and Exporters window and reintroduced the willing buyer, willing seller model.
The naira has continued to depreciate against the dollar and other major foreign currencies since then.
The official exchange rate increased from N463.38/$ to N843.07/$ as of December 7. At the parallel market, the naira depreciated to N1,178/$ from 762/$.
The high cost of sourcing FX was one of the major factors that pushed Nigeria’s inflation rate to an 18-year high of 27.33 percent in October from 26.72 percent in the previous month, according to the NBS.
Read also: Top 10 banks with highest income tax payments in Q1
The CIT report also highlighted that on a quarter-on-quarter basis, education recorded the highest growth rate with 59.6 percent, followed by public administration and defence, and compulsory social security with 57 percent.
“On the other hand, activities of households as employers, undifferentiated goods- and services-producing activities of households for own use had the lowest growth rate with –74.34 percent, followed by Water supply, sewerage, waste management, and remediation activities with -73.25 percent,” it said.
In terms of sectoral contributions, information and communication (26.2 percent) manufacturing (23.9 percent) and mining and quarrying with (11.7 percent) were the top three largest shares in Q3.
While the activities of households as employers, undifferentiated goods- and services-producing activities of households for own use recorded the least share with 0.00 percent, followed by water supply, sewerage, waste management, and remediation activities with 0.04 percent and activities of extraterritorial organisations and bodies with 0.10 percent.
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