THE total Companies Income Tax (CIT) collected by the Federal Inland Revenue Service (FIRS) in the third quarter (Q3) of 2023 was far higher than the total CIT collection from local firms, which is an indication of Nigeria’s harsh operating environment worsened by the recent reforms of the President Bola Tinubu-led Federal Government.
The ‘Company Income Tax’ report for Q3 2023, provided by the FIRS, validated and released by the National Bureau of Statistics (NBS) on Friday, December 8, indicated that the FIRS collected lower CIT from local firms than foreign firms.
The report shows that foreign firms’ CIT payments rose by 235.63 per cent to N1.097 trillion in Q3 2023 from N327.02 billion in Q2 2022, while local firms’ CIT payments increased by 34.87 per cent to N651.63 billion from N483.17 billion, representing a N770.56 billion increase for foreign firms CIT payment and an N168.46 billion for local firms CIT payment.
A cursory look at CIT reports for the first and second quarters of this year showed that the total amount of CIT payment by local firms stood at N300.78 billion in Q1, higher than the N168.23 billion total CIT paid by foreign firms. Also, in Q2, the total local firms’ CIT payment of N1.03 trillion was higher than the N505.91 billion CIT paid by foreign firms.
However, in the review quarter (Q3), the total sum of N651.63 billion in CIT payments by local firms was lower than N1.097 trillion in CIT payments by foreign firms.
According to PricewaterhouseCoopers (PwC) International Limited, a tax consultant firm, resident companies are liable to CIT on their worldwide income. At the same time, non-residents are subject to CIT on their Nigeria-source income.
It pointed out that companies with gross turnover greater than N100 million are entitled to pay a 30 per cent CIT rate, and companies with gross turnover greater than N25 million and less than N100 million pay a 20 per cent rate. In contrast, companies with a gross turnover of N25 million pay zero per cent.
The lower amount of CIT paid by local firms relative to the foreign firms deliberately shows us the realities of the Nigerian economy, the Head of Financial Institutions rating at Agusto&Co, Ayokunle Olubunmi, told The ICIR.
He said, “All those reforms that the new administration introduced were meant to make the country go forward. Still, we are going through the teething stage, and the impact significantly affects the economy and companies’ performances.
“As we all know, the profitability of a company is what determines the amount of taxes paid. You can see that the environment is not as harsh and challenging for companies operating outside the country as what we have in Nigeria.”
Meanwhile, in the review quarter, CIT aggregate rose to N1.75 trillion from N810.19 billion in the corresponding quarter of 2022.