ABUJA (Sundiata Post) – Nigeria’s company income tax (CIT) rose by 151 percent in the second quarter of 2024, driven by the Federal Government’s collection drive.
The latest National Bureau of Statistics (NBS) report revealed that the CIT surged by 150.83 percent to N2.47 trillion in the second quarter of 2024 from N984.61 billion in the first quarter of 2024.
“The corporate tax increase is most likely because the Federal Government’s drive to collect more taxes from the companies is improving and stronger than it used to be. There has also been some modification in tax policies which is responsible for the surge in the company income tax,” Uchenna Uzo, a professor of marketing at Lagos Business School, said.
He said that the increase in tax collection will likely increase the Federal Government’s revenue, meaning that there are more resources to drive developmental projects by the government.
“If the revenue from company income tax is used for developmental projects, then it will have a positive economic impact on the country because the environment for doing business will be better,” Uzo said.
He said the firms will pass the burden on to the consumers which may impact inflation.
The CIT increased by 59.4 percent year-on-year from N1.55 trillion in the second quarter of 2023.
“Nigeria’s company income tax has grown by 150.83 percent in the second quarter of 2024 because the nominal incomes of resident and non-resident companies have increased. While this would seem like the country is growing corporate income, it is not so impressive when adjusted for inflation or foreign exchange,” Samson Simon, chief economist ARKK Economics & Data Limited, said.
He said, however, on the bright side, progress is being made regarding more revenue for the government spending on critical needs like education and health, which also means less need to borrow and exacerbate an already bad debt situation.
“Local payments received were N1.35 trillion, while foreign CIT payment contributed N1.12 trillion in Q2 2024,” the NBS report stated.
“In terms of sectoral contributions, the top three largest shares in Q2 2024 were Financial and insurance activities with 15.53 percent; manufacturing with 8.99 percent; and Information and communication with 7.84 percent.
“Nevertheless, 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, sewage, waste management, and remediation activities with 0.02 percent and activities of extraterritorial organisations and bodies with 0.03 percent,” it said.
The Presidential Fiscal Policy and Tax Reforms Committee, in a bid to bolster tax collection in the country, proposed a five percent reduction in the country’s company income tax rate to improve the ease of doing business and attract more domestic and foreign direct investments into the country.
In July, the Federal Inland Revenue Service (FIRS) said the number of taxpayers in the country has increased by 170,000 as the service recorded a 20 percent improvement in compliance rate.
According to the News Agency of Nigeria (NAN), Femi Olarinde, special adviser to the FIRS Chairman, made this statement during a media parley held on Thursday.
Olarinde said he observed that the rise in the number of taxpayers resulted from the emergence of more businesses, companies, and industries in the country.
Read also: Multinational payment doubles FG’s corporate tax haul on weaker naira
Taiwo Oyedele, chairman of the Presidential Fiscal Policy and Tax Reforms Committee, disclosed recently at a public consultation and stakeholder engagements in Abuja that his committee had considered the need to incentivise more companies to operate in the country, create jobs and stimulate economic activities as part of the comprehensive reforms proposed to transform the fiscal space, tax landscape and business environment.
“Nigeria’s current Company Income Tax rate is 30 percent, and the plan is to reduce it by 5 percent to incentivise companies to operate here. This will lead to significant investments in new projects, expansion of operations and unlock economic opportunities,” he stated.
He highlighted that the committee seeks to reduce the number of taxes in the country to a single digit through its proposed reforms.
“Currently, Nigeria has about 60 different taxes and levies officially approved and over 200 unofficial levies across the country, which has increased business costs and adversely impacted the economy,” Oyedele stated.
“The focus is to streamline them into a single digit, improving compliance and ease of tax payment,” he said.
