Tax payments from foreign companies in Nigeria plummet by 45.3% in three months
According to the latest Company Income Tax (CIT) report released by the National Bureau of Statistics (NBS), tax payments from foreign companies operating in Nigeria have seen a significant decline of 45.3 percent within a span of three months.
The report highlights that tax revenue to the Federal Government dropped to N596.1 billion in the fourth quarter of the previous year, down from N1.09 trillion in the preceding quarter. However, despite this quarterly decline, the report also notes a substantial surge in tax revenue for the full year, which increased by 108 percent to N2.39 trillion.
The CIT for the fourth quarter of the year stood at N1.13 trillion, indicating a quarter-on-quarter growth rate of -35.40 percent, as compared to N1.75 trillion in the third quarter. Of the total CIT receipts in the fourth quarter, local payments amounted to N533.93 billion, while foreign CIT payments contributed N596.10 billion, according to the NBS report.
This drastic reduction in tax payments from foreign companies raises concerns about the economic implications and underscores the need for further analysis and potential policy adjustments to address the decline.
CIT, which is also known as corporate tax, is a levy the government imposes on the income of a company.
The rate is hinged on zero percent for companies with gross turnover of N25 million or less, 20 percent for companies with gross turnover greater than N25 million and less than N100 million, and 30 percent for large companies above N100 million.
The NBS report also revealed that the tax revenue from both local and foreign firms in Africa’s biggest economy grew by 72.8 percent to N4.89 trillion last year from N2.83 trillion in 2022.
In terms of contribution, manufacturing activities contributed the most tax revenue to the government with N626.4 billion followed by information and communication (N466.6 billion) and financial and insurance activities (N428.8 billion).
“The tax collection efficiency has improved due to its technology called TaxPro-Max. It has been able to capture people that have been evading taxes for years,” Macroeconomic Strategist and Head of Investment Research at Afrinvest West Africa Limited, Damilare Asimiyu, said.
The Federal Inland Revenue Service, in 2021, introduced TaxPro-Max, a tax administration solution for the ease of tax compliance. The technology enables seamless registration, filing, payment of taxes, and automatic credit of withholding tax as well as other credits to the taxpayer’s accounts among other features.
During the public presentation of the country’s 2024 Budget Proposals last November, Abubakar Bagudu, Minister of Budget and Economic Planning, revealed that the federal government achieved N8.65 trillion in revenue in the first nine months of this year from its pro-rata target of N8.28 trillion.
Out of the N8.65 trillion revenue, N1.42 trillion was generated from oil revenues, while non-oil revenues totalled N2.50 trillion.
