Narrow Concentration of Corporation Tax Payers


Friday, December 04, 2020 / 9:24 AM / by FBNQuest Research/ Header Image Credit: Business Expert


The NBS has again drawn data from a fellow government institution and repackaged it to enhance macro analysis, this time with the local collection of companies' income tax (CIT) by sector of the economy. The breakdown does not cover foreign CIT payments or unidentified "other" payments. Total identified collection in Q3 '20 of NGN245bn was 2.6% lower than the previous quarter, which could be explained by a handful of payments by large companies.


It was also 7.9% down on Q3'19. Professional services provided almost one quarter of total CIT collections in 9M '20. This includes telecoms, which is consistently the fastest growing industry, has the highest profile, and also acts as a cash cow for state and local governments.


Alongside this breakdown by sector, it would be useful to see contributions by company size for the insight into the success (or not) of the FGN in extending coverage to the millions of SMEs in Nigeria. Some small firms may be included under commercial and trading. Our hunch, however, is that multinationals, banks and other large Nigerian-owned companies are paying the lion's share of locally collected CIT. The FGN needs far wider coverage if it is to meet its capital spending aspirations.


Looking back to previous years, we note that the largest contributing sector in 2018 was banks and financial institutions (followed by professional services).


Oil producers do not feature in our chart perhaps because they also pay petroleum profit tax (PPT).


The collection of CIT is highly seasonal. It is concentrated in the second and third quarters, while the fourth generates more revenue than the first.


The data on VAT collection by sector tell a similar story (Good Morning Nigeria, 08 September 2020). Other manufacturing tops the list and is followed by professional services, which, we assume, includes telecoms although it is not specifically shown as such. Banks and financial institutions do not feature in the top five, not being important collectors of VAT, and their place is taken by breweries, bottling and beverages.


We are a little surprised that, as with VAT, state ministries and parastatals collected substantially more CIT over the nine months than their federal counterparts (NGN37bn vs NGN16bn).


The NBS has obtained the data from the Federal Inland Revenue Service, the largest collection agency which is responsible for CIT, PPT and several other taxes.


CIT payments by sector 9M '20 (% shares)                                           Total NGN629bn

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Source: National Bureau of Statistics (NBS);  FBNQuest Capital Research

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