The Nigerian government through the Federal Inland Revenue Service (FIRS) generated the sum of N864.72 billion as company income taxes in the first half of the year (H1 2021), representing a 57.8% achievement rate compared to the annual CIT projected revenue of N1.49 trillion.
This is contained in the recently released company income tax report, by the National Bureau of Statistics (NBS).
Nigeria’s corporate tax increased by 21.5% and 23.9% compared to N711.73 billion and N697.71 billion recorded in H2 2020 and H1 2020 respectively.
Company income tax are taxes paid by companies from their taxable income after expenses have been deducted. Companies are required to register for tax and file their audited accounts and tax computations with the FIRS within six months of their financial year-end on a self-assessment basis or 18 months after incorporation.
A cursory look at the report shows that out of the total amount generated in H1 2021, N570.1 billion was generated as CIT locally while N236.1 billion was generated as foreign CIT payment. The balance of N58.6 billion was generated as CIT from other payments.
The breakdown of the figures shows that N392.65 billion was generated in Q1 2021, while N472.1 billion was recorded in Q2 2021, which sums up to N864.7 billion recorded in the review period. Corporate taxes generated by the government has recorded significant increases in recent time, with the exemption of 2020, which was affected by the covid-19 pandemic.
Further checks reveal that a total of N8.97 trillion has been generated through corporate taxes from 2015 to date. So far in 2021, revenue from taxes stood at N1.87 trillion (VAT + CIT).
FIRS achieves 57.8% of the CIT revenue budget
The federal government had projected a N4.6 trillion non-oil tax revenue for the 2021 fiscal year, with CIT projected revenues at N1.49 trillion, VAT (N1.84 trillion), and customs revenue of N1.27 trillion. The latest corporate tax figures indicate a 57.8% achievement rate in the first six months of the year.
This is an impressive performance, especially with the uncertainty surrounding oil revenue in recent times, occasioned by the volatility in the global crude oil price and the cut in production quota.
According to the Medium-term Expenditure Framework and fiscal strategy paper, released by the Budget Office, Nigeria’s gross oil and gas revenue between January and May 2021 was N669.9 billion lower than the expected N2.16 trillion, for the period.
In the same vein as the CIT, value-added tax for the review period represents a 54.9% achievement rate and could reach the target of N1.84 trillion by the end of the year.
Sectors with the highest CIT remittances
Professional services led the list of sectors with the highest corporate tax remittance in H1 2021, with a total of N148.76 billion, followed by other manufacturing with the sum of N103.52 billion, and financial institutions comprising of banks with 69.26 billion.
Commercial and trading activities remitted a sum of N37.15 billion, breweries, bottling and beverages sector remitted N30.41 billion in the review period.
On the other hand, the textile and garment industry recorded the lowest CIT with N40.72 million, followed by automobiles and assemblies with a CIT of N135.72 million.
While the improved corporate tax could indicate increased activity in various sectors in the corporate space, the committee of Nigeria’s monetary policy during its last meeting noted an improvement in the manufacturing PMI in July to 46.6 index points in July 2021 compared to 45.5 index points recorded in the previous month.
Why this matters
Corporate tax forms an important part of Nigeria’s non-oil revenue, and an improvement in Nigeria’s tax revenue means more firepower to finance its budget expenses, rather than acquiring more loans.