The Nigerian government, through the Federal Inland Revenue Service (FIRS), generated the sum of N864.72 billion in corporate taxes in the first half (H1 2021), which represents an achievement rate of 57.8% compared to CIT’s projected annual revenue of 1.49 trillion naira.
This is contained in the recently published corporate income tax report, by the National Bureau of Statistics (NBS).
Corporate tax in Nigeria has increased by 21.5% and 23.9% from the N711.73 billion and N697.71 billion recorded in H2 2020 and H1 2020 respectively.
Corporate income tax is the tax paid by corporations on their taxable income after deducting expenses. Businesses are required to register for tax purposes and file their audited accounts and tax calculations with FIRS within six months of the end of their financial year on a self-assessment basis or 18 months after the Constitution.
A quick review of the report shows that out of the total amount generated in the first half of 2021, N570.1 billion was generated as CIT locally, while N236.1 billion was generated as a foreign CIT payment. The balance of 58.6 billion naira was generated as income tax from other payments.
The breakdown of the figures shows that 392.65 billion naira was generated in the first quarter of 2021, while 472.1 billion naira was recorded in the second quarter of 2021, which represents 864.7 billion naira recorded during the review period. Government-generated corporate taxes have seen significant increases in recent times, with the 2020 exemption, which was affected by the covid-19 pandemic.
Further checks reveal that a total of 8.97 trillion naira has been generated from corporate taxes from 2015 to date. So far in 2021, tax revenue stood at 1.87 trillion naira (VAT + CIT).
The FIRS achieves 57.8% of the CIT revenue budget
The federal government had forecast non-oil tax revenues of N 4.6 trillion for FY2021, with projected CIT revenues of N 1.49 trillion, VAT (N 1.84 trillion) and revenue. tariffs of 1.27 trillion naira. The latest corporate tax figures show a realization rate of 57.8% over the first six months of the year.
This is an impressive performance, especially with the uncertainty surrounding oil revenues of late, brought about by the volatility of the world price of crude oil and the reduction in production quotas.
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 NN 2.16 trillion. naira expected for the period.
In the same vein as the CIT, the value added tax for the period under review represents an achievement rate of 54.9% and could reach the target of 1.84 trillion naira by the end of the year. .
Sectors with the highest CIT transfers
Professional services lead the list of sectors with the highest corporate tax payments in the first half of 2021, with a total of 148.76 billion naira, followed by other manufacturing sectors with a sum of 103.52. billion naira and financial institutions including banks with 69.26 billion.
Trade and commerce activities remitted N37.15 billion, the brewing, bottling and beverage sector remitted N30.41 billion during the reporting period.
On the other hand, the textile and clothing industry recorded the lowest CIT with N 40.72 million, followed by automobiles and assemblies with a CIT of N 135.72 million.
While improving corporate taxes could indicate an increase in activity in various sectors of the business space, Nigeria’s monetary policy committee at its last meeting noted an improvement in the manufacturing PMI in July to 46.6 index points in July 2021 against 45.5 index points recorded in July. the preceding month.
Why it matters
Corporate tax is a significant portion of Nigeria’s non-oil revenue, and improved Nigeria’s tax revenue means more firepower to fund its budget spending, rather than acquiring more loans.