Taxes paid by Nigerians involved in wholesale and retail trade, as well as motor vehicle and motorcycle repairs, saw a significant rise of 49% in the first half of 2024 compared to the same period last year. This spike is attributed to increased collections of both Value Added Tax (VAT) and Company Income Tax (CIT), according to reports from the National Bureau of Statistics (NBS).
CIT, which is levied at a rate of 30%, is applied to the profits of corporations, while VAT, set at 7.5%, is a consumption tax charged at the point of sale and ultimately passed on to consumers.
The total tax contribution from the sector amounted to N185.19 billion in H1 2024, a sharp increase from N124.39 billion in H1 2023. VAT collections alone surged by 50%, rising from N63.24 billion in H1 2023 to N94.76 billion in H1 2024, indicating strong consumer spending despite ongoing inflation. Similarly, CIT increased by 48%, reaching N90.43 billion compared to N61.14 billion in the same period last year, reflecting the sector’s sustained profitability despite rising costs.
In comparison to the second half of 2023, total taxes grew by 44%, with VAT and CIT continuing their upward trajectory. The rise is partly reflective of inflation driving up prices for goods and services, thus increasing VAT collections, while businesses faced higher operational costs due to inflation and other macroeconomic headwinds.
Nigeria’s tax landscape remains challenging for small businesses, with over 60 official and 200 unofficial levies in place. The Federal Inland Revenue Service (FIRS) has taken steps to streamline tax collection, introducing the VAT Direct Initiative in July 2023, which exempts businesses with a turnover of less than N25 million from VAT obligations.
Further efforts to integrate the informal sector into the tax system were bolstered by the launch of the Integrated Market Revenue Management System (IMRMS) in December 2023, aimed at enhancing VAT collection and reducing the burden of multiple taxation.
Credit: Nairametrics (Text Excluding Headline)
