In Q1 2020, Nigeria’s tier-1 banks –FBN Holdings Plc, United Bank for Africa Plc, Guaranty Trust Bank Plc, Access Bank Plc, and Zenith Bank Plc – collectively paid the sum of N29.8 billion as company income tax to the Federal Inland Revenue Service (FIRS) and others.
The details: A breakdown of the tax payments, according to checks by Nairametrics Research, shows how the most profitable banks during the first quarter of the year also paid the most taxes.
For instance, Zenith Bank, which reported the largest profit of N50.1 billion in Q1 2020, also paid the most tax of N8.3 billion. This is followed by Guaranty Trust Bank Plc which paid total tax of N8.1 billion to the FIRS, thereby reporting a profit after of N50.1 billion.
Note that FBN Holdings Plc, which paid out N5.5 billion worth of company income tax in Q1 2020, is the holding company for First Bank of Nigeria Limited and a slew of other subsidiaries. What this means, therefore, is that the N5.5 billion tax encompasses all the group of companies under the Hold-Co.
See the embedded tweet below for a full glance of how much taxes the tier-1 banks paid during the period under review.
Tier 1 banks in Nigeria and tax expenses incurred in Q1 2020
Zenith bank – N8.3bn
GT bank – N8.1bn
First bank – N5.5bn
Access bank – N5.3bn
UBA – N2.6bn{NSE]
— Nairalytics (@Nairalyticsdata) May 29, 2020
Why this matters: This level of tax compliance interests the FIRS for many reasons. For one, it is the tax agency’s main responsibility to generate revenue for the Federal Government through various forms of tax; specifically the company income tax. And it would be impossible to accomplish this without the compliance of companies such as those mentioned above.
In the meantime, there are strong indications that these tier-1 banks and others may enjoy tax exemptions in Q2 2020. This possible tax holiday (for tier-1 banks and others) is owing to the fact that they recently donated billions to facilitate the fight against the COVID-19 pandemic.
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As Nairametrics previously reported, the significant COVID-19 donations that were made by these banks (and other companies), could entitle them to some forms of tax exceptions. Even Nigeria’s Minister of Finance, Budget, and National Planning, Zainab Ahmed, noted this possibility during a recent interview.
Some Nigerian companies have often enjoyed tax holiday, an arrangement whereby the Federal Government either reduces or completely eliminates taxes for select companies. A Nigerian company can also get a tax credit, which basically has to do with the sum total that can be offset against such a company’s tax liability after it must have carried out a project on behalf of the government.
This is not correct, Note 21 of the published account of Zenith Bank for Q1 indicated the details of the taxes for the quarter and what was paid to FIRS by the company. N3.649b was the tax paid.