Improvement in Nigeria’s Tax – The latest company income tax (CIT) and value-added tax (VAT) figures show an improvement in Nigeria’s tax take despite signs of economic weakness. Total VAT receipts amounted to just over N1trn in H1 2021, reflecting a 54.8% y-o-y increase (up 67.8% on H1 2019). Total CIT came in at N865bn in H1 2021, up 23.9% y-o-y and 16.3% higher than the H1 2019 figure. The economic slump last year pushed total VAT higher than total CIT for the first time on record – accelerating a trend that had been in place for a number of years. The latest figures show that VAT remained more important than CIT from a revenue perspective in the first half of this year.
Local VAT accounted for 41% of the total VAT intake, with foreign VAT accounting for 38% and import VAT (customs) for the remainder. All three these sources of VAT showed strong increases on both H1 2019 and H1 2020 levels, with foreign VAT almost doubling relative to H1 2019, and more than doubling relative to H1 2020. Local CIT accounted for nearly two-thirds of total CIT in H1 2021. The local CIT figure of N570bn in H1 2021 is almost 50% higher than both the H1 2019 and H1 2020 figures, showing that local CIT did not show any significant decline last year despite economic weakness.
Looking at CIT from a sectoral perspective, professional services accounted for 26% of total CIT intake in H1 2021 and this sector was the main driver behind the notable increase in CIT during the semester. It should be noted that this category includes telecommunication services, which are easier to tax (in the sense that it is difficult for these companies to evade taxes given their prominence) and would have benefited from increased online activity due to the pandemic. Other manufacturing (which excludes sectors such as oil, pharmaceuticals, chemicals, beverages, and textiles) accounted for 18% of CIT intake in H1 2021, followed by financial services at 12%.