Reforms introduced by the Federal Government of Nigeria towards generating significant revenue through taxes have started to pay off as the country realised N4.9 trillion revenue from the Company Income Tax (CIT) in 2023 confirming that those initiatives are worthwhile. That amounted to an increase of 73 percent over N2.83 trillion realised in 2022.

A case in point is the setting up of the Presidential Committee on Fiscal Policy and Tax Reforms headed by Taiwo Oyedele, a tax guru from PwC.

On a quarter-on-quarter basis, Nigeria realised N469 billion CIT revenue in Q1 2023; N1.55 trillion in Q2 2023; N1.75 trillion in Q3 2023, and N1.13 trillion in Q3 2023.

In the same manner, Nigeria generated N3.64 trillion from Value Added Tax (VAT), an increase of 44.9 percent over N2.51 trillion realised in 2022. This comprises N2.1 trillion local VAT and N1.54 trillion foreign VAT, according to the data provided by the nation’s data agency, the National Bureau of Statistics (NBS).

Concerning company income tax, higher revenue from the manufacturing, telecommunications, as well as financial and insurance sub sectors was responsible for the increased company income tax in 2023.

CIT from the manufacturing sub sector hit N626.42 billion in 2023 compared to N468.60 billion in 2022, representing 33.7 percent during the period. This amounted to an increase of N157.82 billion in just a financial year. Information and communications generated the second highest amount of CIT to the tune of N466.56 billion representing an increase of 28.8 percent when compared with N362.26 billion realised in 2022.

CIT from the financial and insurance sub-sector amounted to N458.85 billion in 2023, representing an increase of 119.6 percent or N249.92 billion over the previous year’s tax revenue from this sector.

Mining and quarrying sub sector occupied the fourth position in terms of CIT revenue to the tune of N235.16 billion in 2023 compared to N141.58 billion in the previous year. In other words, the increase was 66.1 percent or a gain of N93.58 billion during the period.

CIT from the public administration, defence, and compulsory social security generated N130.59 billion in 2023 as against N95.40 billion in 2022. Also, wholesale and retail trade, repair of motor vehicles and motorcycles earned the nation N114.97 billion as CIT revenue in 2023 compared to N60.06 billion in 2022.

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It should be noted that Nigeria has intensified efforts to increase revenue by blocking leakages and reducing tax avoidance. Many initiatives have gone into this including the setting up of the presidential committee on tax, headed by Taiwo Oyedele, farmer senior partner at PwC Nigeria.

One of the initiatives is to generate revenue while reducing the burden on the low-income earners in the country.

“Engaging the public in fiscal policy reforms is crucial, so we seize every opportunity to share our plans, and our thought process, provide clarifications and address areas of concern, all in the public interest.

“Currently, we have over 60 taxes, levies and charges across the 3 levels of government with state and local governments administering 46 taxes and levies, including road taxes, motor park levies, truck, canoe, wheelbarrow and cart fees etc. There are even more unauthorised taxes all disproportionately affecting small businesses including petty traders, hawkers, artisans, truckers, cart pushers, okada riders and other transporters.

“The associated costs are inevitably passed on to consumers, mostly low-income earners. The players also have to contend with the unorthodox means of collection and harassment from untrained “revenue collectors” on highways, markets, streets while there is very little to show for the revenues collected,” Taiwo Oyedele said recently.

All but one activity category recorded an increase in CIT revenue generated in 2023. The odd one out is the water supply, waste management and remediation subsector which recorded N1.54 billion as CIT revenue, amounting to a decline of 15.2 percent when compared to N1.82 billion generated in 2022.

Local CIT amounted to N2.51 trillion, an increase of 49.5 percent over N1.68 trillion realised in 2022, while the nation earned N2.38 trillion from foreign CIT payments, amounting to 107.4 percent rise over N1.15 trillion realised in 2022.

In terms of contribution to VAT revenue in 2023, the manufacturing sector at N578.39 billion generated the most VAT revenue. It was followed by the information and communication sub sector from where the nation earned N412.30 billion, while N260.04 billion was generated from the mining and quarrying subs sector.

And financial and insurance activities, N215.78 billion, as well as public administration and defence, N180.91 billion completed the top five VAT generating sectors in 2023.