CIT, VAT Collection Rises By 40.5% To N5.34trn In 2022

The federal government last year generated a total of 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 as companies began to recover from the impact of the 2020 COVID-19 pandemic.

The lockdown that followed the spread of the COVID-19 virus had halted supply chains as business were forced to shut down. However, business activities picked up in full gear in 2022, leading to increased CIT paid by companies.

Specifically, 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. Data released by the National Bureau of Statistics(NBS) showed that foreign CIT collected in 2022 accounted for 40.6 per cent of the total CIT collected.

Foreign CIT collected in 2022 stood at N1.149 trillion. Meanwhile, the amount of Value Added Tax collected in 2022 stood at 2.511 trillion a 16.25 per cent increase over N2.165 trillion that was collected in 2021.

At the end of last year, 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.

According to analysts at Afrinvest West Africa, 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 realised 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.

Analysts at Cordros Research noted that “in the absence of any major shock to the economy, we expect the CIT collections to continue to improve, albeit slowly, over the short – term, more so that we expect foreign collections to remain firm. Our expectation of a moderate rise is in line with the  resilience of domestic economic activities despite increasing downside risks, and high base from the prior year.”