In the most recent Company Income Tax (CIT) report released by the National Bureau of Statistics, it was revealed that Tax payments from Nigerian businesses decreased by 15% in the final quarter of the year 2023. The total tax revenue to the Federal Government also saw a decline for the second consecutive quarter, dropping to N533.93 billion in Q4 from ₦651.62 billion in the preceding quarter. In Q4 of the year under review, there was a significant decrease in CIT, dropping to ₦1.13 trillion from ₦1.75 trillion in Q3, representing a negative growth rate of -35.40%.
According to the NBS report, ₦533.93 billion was collected in local payments, while ₦596.10 billion was received in Foreign CIT Payment during the fourth quarter. Corporate income tax, which is also referred to as corporate tax, is a government-imposed levy on a company’s earnings. The percentage of the rate depends on the company’s gross turnover: 0% for companies making less than ₦25 million, 20% for companies making more than ₦25 million but less than ₦100 million, and 30% for larger companies earning over ₦100 million.
Business operations in the country declined in 2023.
The economic climate in Nigeria worsened as the aftermath of the subsidy removal set in, which saw PMS price rise and the decline of Naira value due to the floating of the currency. This caused companies in the country to suffer financially, with some even experiencing losses by the end of the year. The weakening naira made Inflation worse, making it harder for consumers to buy things and increasing costs for businesses. In 2023, the country experienced a significant decline in business operations, as Inflation surged to 31.07 percent in February compared to 29.9 percent in the previous month. Food inflation, accounting for half of the overall inflation rate, also spiked to 37.92 percent.
Last year, several major corporations, including Procter and Gamble, GlaxoSmithKline Consumer Nigeria, Equinor, Sanofi, and Bolt Food, decided to withdraw from Africa’s largest Economy due to the challenging business climate. The Manufacturers Association of Nigeria reported that Manufacturing operations were adversely affected by the ongoing shortage of foreign exchange and the Devaluation of the local currency. Manufacturers are struggling due to the ongoing FX shortage and constant decline of the naira, which has hindered their ability to fully utilize their capacity. Importing essential materials from abroad has become incredibly challenging, causing significant financial strain on these businesses.
TaxPro-Max technology have boost tax collection efficiency.
A report by the NBS shows that Tax Revenue from companies in Nigeria, whether local or foreign, increased significantly by 72.8% to ₦4.89 trillion in the previous year, up from ₦2.83 trillion in 2022. The manufacturing sector led the way in contributing tax Revenue to the government with ₦626.4 billion, followed by information and communication at ₦466.6 billion, and financial and Insurance activities at ₦428.8 billion. Tax Collection efficiency has seen a significant boost thanks to the innovative TaxPro-Max technology.
Damilare Asimiyu, a macroeconomic strategist and head of Investment research at Afrinvest West Africa Limited said the Federal Inland Revenue Service successfully caught individuals who had been avoiding paying taxes for many years. In an effort to simplify tax compliance, the agency launched TaxPro-Max, a Tax Administration solution, in 2021. The seamless Technology allows for easy registration, filing, and tax payment, automatically crediting the taxpayer’s account with withholding tax and other credits, along with various other features.
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Abubakar Bagudu, the minister in charge of budget and economic planning, in a recent public speech about the 2024 Budget Plans for the nation, shared that the federal government has surpassed its revenue target by reaching ₦8.65 trillion in the first three quarters of the year. Oil revenues accounted for ₦1.42 trillion of this total, with non-oil revenues contributing ₦2.50 trillion. The Federal Inland Revenue Service (FIRS) announced in January that it had exceeded its revenue target by collecting a historic ₦12.4 trillion in taxes for the country in 2023. According to Taiwo Oyedele, who led the Presidential Tax Reform Committee, Nigeria provides approximately ₦6 trillion worth of tax incentives to corporations on a yearly basis