As Brand Owners recover from the impact of the 2020 COVID-19 pandemic, the federal government has generated a whopping N5.34 trillion from Company Income Tax (CIT) and Value Added Tax (VAT) in 2022, a 40.5 per cent increase over N3.8 trillion which it collected in 2021.
Despite the lockdown that followed the spread of the COVID-19 virus which halted supply chains as businesses were forced to shut down, business activities finally picked up in full gear in 2022, leading to increased CIT paid by companies and VAT paid on products and services.
According to the analysis released by the National Bureau of Statistics (NBS), CIT collected in 2022 rose significantly by 72.56 per cent to N2.83 trillion as against N1.64 trillion which was recorded in 2021 while foreign CIT collected in 2022 accounted for 40.6 per cent of the total CIT collected.
At the end of 2022, Import VAT collected by the Nigeria Customs Service totaled N521.49 billion accounting for 20.7 per cent of the total figure while non-import foreign VAT collected amounted to N510.807 billion accounting for 20.3 per cent of the total VAT collected.
On the other hand, local VAT collected accounted for the largest chunk of what was collected as Value Added Tax in 2022 with N1.479 trillion which is 58.9 per cent of the total figure.
Afrinvest West Africa also revealed that the sharp increase in CIT was driven by the full adoption of the automated tax filing system, the Taxpro-Max Solution by the Federal Inland Revenue Service (FIRS).
For the released CIT, inflows from domestic businesses led by Manufacturing with 16.6 per cent, ICT with 12.8 per cent, and Finance & Insurance with 7.4 per cent accounted for 59.4 per cent, while foreign CIT payment accounted for the balance of 40.6 per cent.
“By adjusting for collection cost, capped at 50.0 per cent in the finance act 2022, we estimate that federal government realised N1.4 trillion in CIT revenue, representing a 55.6 per cent outrun on the budgeted amount. Also, by adjusting for collection cost and federal government’s 15 per cent share of VAT proceed, we estimate that the federal government realised N330.9 billion from VAT against the budgeted amount of N316.7 billion.
“Despite the positive performance of these non-oil tax revenue channels, we maintain that actual budget deficit for 2022 would surpass the N8.2trillion budgeted, due to revenue underperformance from sources such as oil & gas, independent flows, and government- owned enterprises.
“Hence, we canvass that the incoming administration should drive more reforms that would improve the business environment and strengthen tax laws in order to sustain a geometric growth in non-volatile revenue sources like the non-oil tax in the near term,” Afrinvest analysts said.