Treasury generates N11.5tr via overburden on small number firms paying tax
By Jeph Ajobaju, Chief Copy Editor
Company Income Tax (CIT), also called corporate tax, has fetched N11.5 trillion into federal coffers since Muhammadu Buhari became President in 2015, based on data published by the National Bureau of Statistics (NBS).
CIT generated N1.3 trillion when Buhari assumed office in 2015 but dipped 26 per cent to N1 trillion in 2016 when the economy went into recession.
CIT, collected by the Federal Inland Revenue Service (FIRS), kept an upward trajectory between 2017 and 2020, raking in N5.3 trillion in the four years, amid cries in the real sector of over-taxation of a small number of companies paying tax.
CIT is a tax on the profits of incorporated entities in Nigeria. It also includes tax on the profits of non-resident companies doing business in Nigeria. It is paid by limited liability companies, including public limited liability companies.
The CIT rate is 30 per cent for large companies with gross turnover greater than N100 million, assessed on a preceding year basis (charged on profits for the accounting year ending in the year preceding assessment).
CIT generated N1.6 trillion in 2021 and a record N2 trillion in the three quarters of 2022, the highest contributors being manufacturing, Information Communication Technology (ICT), and financial services, according to NBS data, per The PUNCH.
Corporate tax paid by ICT firms rose 158.51 per cent from N51.05 billion in the third quarter of 2021 (Q3 2021) to N131.97 billion in Q3 2022.
Manufacturers paid the most taxes in the period as Abuja increased the number of taxes collectable by the FIRS from 39 to 61 items.
New taxes in the schedule to the taxes and levies (Approved list for collection) Act (Amendment Order) 2015, include “national information technology development levy, economic development levy, environmental (ecological) fee or levy; inter-state road taxes; mining, milling and quarrying fee; infrastructure maintenance charge; social services contribution tax, and wharf landing fee where applicable.
Others are “entertainment tax, produce sales tax, property tax (where applicable); fire service charge; slaughter or abattoir fee, where state finance is involved, etc.”
CIT paid by manufacturers jumped 52.3 per cent from N91.2 billion in Q3 2021 to N138.9 billion in Q 32022.
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Burden on a small number of firms paying tax
Lagos Chamber of Commerce and Industry (LCCI) President Michael Olawale-Cole said the productive sector is overburdened with taxes because of the inability of the government to widen the tax bracket and capture more taxpayers.
He advised Abuja to protect its sources of revenue rather than resort to aggressive taxation whenever it encounters a revenue shortfall.
“The government needs money, but what we are saying is that the government is just putting pressure on the same people as opposed to developing to bring more people into the tax bracket. That is the major issue,” Olawale-Cole told The PUNCH.
“There are a lot of people who are not paying taxes but are making money in this country. So, the government should find a way of catching them.
“They are improving because now government banks are linked with tax authorities. So, if income comes into your account, they have a way of knowing. They should do more of that. This could be done through electronic means.
“We are saying they should not increase the tax rates all the time for the same people who are paying when there are more people who are not paying because if you tax them to a point, they will not be able to pay.”
ICT stakeholders also lament tax burden
ICT stakeholders have also raised concern the sector is overburdened with multiple taxes.
A recent report by SBM Intelligence titled, “Taxing Nigeria’s subnational economies to oblivion”, disclosed ICT suffers from over-taxation because of its sustained growth in the past two decades.
“At the federal level, telecommunications companies are expected to pay taxes such as Companies Income Tax, the Capital Gains Tax, Withholding Taxes, Stamp Duty, National Industrial Training Fund, Employees Compensation Scheme, the Tertiary Education Trust Fund, National Housing Fund contributions, Contributory Pension Schemes, and customs duties,” the report said.
“These taxes are applicable to all incorporated companies in Nigeria.
“There are also sector-specific taxes and levies such as the Annual Operating Levy paid to the Nigerian Communications Commission by all holders of licences issued by the regulator, the National Cybersecurity Fund, the National Information Technology Development Fund Levy and Right of Way charges.”
