Recent data released by the National Bureau of Statistics (NBS) has shown that the country’s company Income Tax (CIT) generated has increased over the years. The generated income is directed by the government toward funding public spendings, infrastructure, and national development. In the second quarter (Q2) of 2024, there was a notable rise in CIT payments in comparison to the first quarter of the year. The Company Income Tax for Q2 2024 was recorded at ₦2.47 trillion overall, according to a report by NBS. This represents approximately 151% quarter-over-quarter increase from ₦984.61 billion in Q1 2024. The leading Revenue generator is still the agricultural sector.
Additionally, growth was noted when compared to the ₦1.53 trillion same period in the previous year. Local payments made in Q2 2024 amounted to ₦1.35 trillion, while ₦1.12 trillion came from foreign payments. The industries with the highest quarterly growth rates are agriculture, forestry, and fisheries with 474.50%, financial and Insurance industries with 429.76%), and Manufacturing with 414.15%. However, the lowest growth rate was recorded by household activities as employers and undifferentiated goods and services producing activities for personal use (-30.22%), followed by extraterritorial organizations and bodies (-15.67%).
Q2 2024 figure shows an increase of 59.52% on an annual basis.
As per the report, the top three sectors contributing the most in Q2 2024 were manufacturing (8.99%), information and communication (7.84%), and insurance and financial services (15.53%). On the other hand, the activities of households as employers and their undifferentiated production of goods and services for their own consumption recorded the lowest share (0.00%), followed by the water supply, sewerage, waste management, and remediation activities (0.02%) and the activities of extraterritorial organizations and bodies (0.03%).
When compared to Q2 2023 generated income of ₦1.55 trillion, Q2 2024 figure shows an increase of 59.52 percent on an annual basis. The increase in revenue achieved in Q2 2024 also represents a recovery from the drop in the company income tax generated in Q1 2024, which was estimated at ₦984.61 billion overall and represents a growth rate of –12.87 percent from ₦1.13 trillion in Q4 2023 on a quarter-over-quarter basis. The Federal Inland Revenue Service (FIRS) is responsible for the enforcement of the Companies Income Tax Act (CITA), which governs CIT.
CIT made up about 31% of overall tax income in 2023.
Companies operating in Nigeria are subject to CIT, meanwhile, those involved in Petroleum operations are subject to separate Taxation under the Petroleum Profits Tax Act (PPTA). For major enterprises with an annual revenue exceeding ₦100 million, the typical CIT rate is 30%. Medium-sized businesses with yearly sales between ₦25 million and ₦100 million are subjected to 20% tax. Businesses that make less than ₦25 million a year are not subject to the tax. Profits that are earned in, sourced from, imported into, or received in Nigeria are considered taxable income.
The CIT revenue collection increased by almost 55% from 2018 to 2023. Tax reforms, more stringent enforcement, and the advent of online tax filing tools like TaxPro-Max are all credited for this rise. In 2023, CIT made up about 31% of Nigeria’s overall tax income. This makes CIT, behind Value Added Tax (VAT) and Petroleum Profits Tax (PPT), one of the main contributors to Nigeria’s total tax collection. The percentage of major corporations that complied with the company income tax as of 2023 was estimated to be approximately 75%, whilst the percentage for small and medium-sized enterprises (SMEs) was approximately 50%.
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About 60 percent of enterprises had used the TaxPro-Max platform for digital tax filing as at mid-2023. The FIRS hopes to raise this to 80% by 2025 through focused Education and incentives. Even with the recent rise in certain tax forms, such as the CIT and Value-Added Tax, Nigeria’s tax-to-GDP ratio of about 10% as of 2023 is still low when compared to the average for Africa countries, which is over 16%. This low ratio emphasizes how much more revenue generation potential there is with enhanced tax compliance and reforms.