September 5, 2023/CSL Research
Based on the latest Company Income Tax report by the National Bureau of Statistics (NBS), Company Income Tax (CIT) for Q2 2023 was reported at N1.53 trillion, up 226.40% q/q from N469.01 billion in Q1 2023. on a year-on-year basis, CIT in Q2 2023 increased by 114.28% when compared with Q2 2022.The report noted that Local payments received were N1.02 trillion, while foreign CIT Payments contributed N505.91bn in Q2 2023. According to the Federal Inland Revenue Service, CIT is a 30% tax on company’s profits. We attribute the significant increase in CIT to an increase in profits by companies in Q2 as the naira cash crunch and the general elections constrained profits in Q1.
In terms of sectoral contribution to CIT, the top three largest shares in Q2 2023 were manufacturing with 25.63%; financial and insurance activities with 24.47%; and information and communication with 20.30%. The activities of households as employers, undifferentiated goods and services, producing activities of households for own use recorded the least share with 0.01%. We note that this is the first time CIT has crossed the N1tn mark in a single quarter. The amount collected in Q2 2023 is higher than the total amount collected in 2015 (N1.38tn), 2016 (N1.02tn), 2017 (N1.25tn), and 2018 (N1.41tn) respectively.
Though we expect revenue from Company Income Tax (CIT) to decline in the second half of the year as the profitability of businesses take a hit amidst increasing cost pressure, we believe taxes from new sources introduced in the new finance act such as the N10 per litre tax placed on carbonated drinks, tax on phone calls, etc. should support accretion to non-oil revenue if they kick-start before year end. The President through a number of executive orders has postponed the commencement date of many of these taxes. To boost CIT revenues, the Federal Government recently announced plans to review and reduce tax waivers given to companies operating in Nigeria. According to the Chairman of the Presidential Tax Reform Committee, Mr Taiwo Oyedele, Nigeria’s total tax incentive to companies is about N6tn annually.
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