Tax payments from local companies in Nigeria dropped by 15 percent in the fourth quarter of last year, according to the latest Company Income Tax (CIT) report by the National Bureau of Statistics.
The report showed that the tax revenue to the Federal Government declined for the second straight quarter to N533.93 billion in Q4 from N651.62 in the previous quarter.
“CIT for Q4 was reported at N1.13 trillion, indicating a growth rate of –35.40 percent on a quarter-on-quarter basis from N1.75 trillion in Q3. Local payments received were N533.93 billion, while Foreign CIT Payment contributed N596.10 billion in Q4,” the NBS report said.
CIT, which is also known as corporate tax, is a levy the government imposes on the income of a company.
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.
Since President Bola Tinubu announced petrol subsidy removal during his inauguration on May 29, pump prices have more than tripled to over N600, while the value of the naira has plunged following the floating of the currency sparking a bloodbath in the bottom lines of companies operating in Nigeria.
Companies in Africa’s biggest economy had their bottom lines hit by the devaluation of the naira currency with some recording losses at the year of the year.
The weakening naira further exacerbated inflationary pressures, eroding consumer purchasing power and increasing operating costs for businesses.
Business activity in the country contracted four times last year, with Inflation hitting 31.07 percent in February from 29.9 the previous month and food inflation, which constitutes 50 percent of the inflation rate, rose to 37.92 percent.
The tough business environment also pushed multinationals to exit Africa’s biggest economy as Procter & Gamble, GlaxoSmithKline Consumer Nigeria, Equinor, Sanofi and Bolt Food left the country in 2023.
Manufacturers Association of Nigeria, said in a report last year that manufacturing activities continued to suffer due to the persisting scarcity of FX and further depreciation of the naira.
The association added that the lingering FX scarcity and continuous depreciation of the naira have left manufacturers bleeding and limited their capacity utilisation since the importation of non-locally produced critical input has become a nightmare.
The NBS report also revealed that the tax revenue from both local and foreign firms in Africa’s biggest economy grew by 72.8 percent to N4.89 trillion last year from N2.83 trillion in 2022.
In terms of contribution, manufacturing activities contributed the most tax revenue to the government with N626.4 billion followed by information and communication (N466.6 billion) and financial and insurance activities (N428.8 billion).
“The tax collection efficiency has improved due to its technology called TaxPro-Max. It has been able to capture people that have been evading taxes for years,” Damilare Asimiyu, macroeconomic strategist and head of investment research at Afrinvest West Africa Limited said.
The Federal Inland Revenue Service, in 2021, introduced TaxPro-Max, a tax administration solution for the ease of tax compliance. The technology enables seamless registration, filing, payment of taxes, and automatic credit of withholding tax as well as other credits to the taxpayer’s accounts among other features.
During the public presentation of the country’s 2024 Budget Proposals last November, Abubakar Bagudu, minister of budget and economic planning, revealed that the federal government achieved N8.65 trillion in revenue in the first nine months of this year from its pro-rata target of N8.28 trillion.
Out of the N8.65 trillion revenue, N1.42 trillion was generated from oil revenues, while non-oil revenues totalled N2.50 trillion.
In January, the FIRS said it collected a record N12.4 trillion in tax revenue for the federation in 2023, surpassing its target of N10.7 trillion.
Taiwo Oyedele, president of the Presidential Tax Reform Committee last year, said Nigeria’s total tax incentive to companies is about N6 trillion annually.
