The Nigerian government has an amount of N1.49 trillion 864.72 billion through the Federal Inland Revenue Service (FIRS) in the first half of the year (H1 2021).
This is included in the National Bureau of Statistics (NBS) recently released income tax report.
Nigeria’s corporate income tax rose 21.5% and 23.9%, respectively, compared to N 711.73 billion and N 697.71 billion recorded in the second half of 2020 and the first half of 2020, respectively.
Corporate income taxes are taxes that companies pay after deducting expenses from their taxable income. Companies are required to register for tax within six months after the end of the financial year on a self-assessment basis or 18 months after the establishment and submit their audited accounts and tax calculations to the FIRS.
A cursory glance at the report reveals that of the total amount N 570.1 billion generated in the first half of 2021 was generated as local CIT, while N 236.1 billion was generated as foreign CIT payments. The balance of N 58.6 billion was generated as CIT from other payments.
The breakdown of the numbers shows that N 392.65 billion was generated in the first quarter of 2021, while N 472.1 billion was generated in the second quarter of 2021, for a total of N 864.7 billion in the reporting period. Government-generated corporate taxes have seen significant increases recently with the exception of 2020, which was hit by the Covid-19 pandemic.
Further controls show that from 2015 until today a total of 8.97 trillion NH were generated through corporate taxes. In 2021, tax revenues so far amounted to N 1.87 trillion (VAT + CIT).
FIRS reaches 57.8% of the CIT income budget
The federal government had forecast tax revenues of N4.6 trillion non-oil taxes for the 2021 financial year, with CIT forecasting revenues of N1.49 trillion, sales tax (N 1.84 trillion) and customs revenues of N1.27 trillion. The latest corporate income tax figures show a success rate of 57.8% for the first six months of the year.
This is an impressive feat, especially given the recent uncertainty over oil revenues caused by the volatility of the global crude oil price and the reduction in the production quota.
According to the Medium Term Spending Framework and Budget Strategy Paper published by the Budget Office, Nigeria’s gross oil and gas revenues were N669.9 billion lower between January and May 2021 than the expected N2.16 trillion for the period.
Similar to the CIT, VAT represents a success rate of 54.9% for the reporting period and could reach the target of N 1.84 trillion by the end of the year.
Sectors with the highest CIT remittances
Professional services topped the list of sectors with the highest corporate income tax remittances in the first half of 2021 with a total of N148.76 billion, followed by other manufacturing with N103.52 billion and financial institutions with banks with N69.26 billion.
The trading and trading activities transferred an amount of N 37.15 billion in the reporting period, while the brewery, bottling and beverage sectors transferred N 30.41 billion.
In contrast, the textile and clothing industry recorded the lowest CIT with N 40.72 million, followed by automobiles and assemblies with N. 135.72 million.
While the improved corporate tax could indicate increased activity in various sectors in the corporate sector, the Nigerian Monetary Policy Committee at its last meeting noted an improvement in the PMI for the manufacturing sector in July to 46.6 index points in July 2021, compared with 45.5 index points in the previous month.
Why is it important?
Corporate tax is an important part of Nigeria’s non-oil revenue, and improving Nigeria’s tax revenue means more firepower to fund its budget expenditures rather than more borrowing.